International Steel Prices

Update on Foreign vs. Domestic Hot Rolled Steel Prices

Written by Brett Linton

Steel Market Update’s latest foreign vs. domestic hot rolled steel price comparison shows that steel imports have become more enticing to U.S. buyers than in previous months, according to the latest SMU and CRU price indices. In our previous update in early November, U.S. producers had lost their price advantage over HRC imports from Far East Asia. Foreign and domestic prices have risen at a relatively similar rate since then, meaning the price spreads are within $4 of what was previously published. Recall that the price differentials between domestic HRC compared to foreign imports had widened through mid-August to reach record highs, but have since declined sharply as steel prices in the U.S. have risen.

The following calculation is used by Steel Market Update to identify the theoretical spread between foreign hot rolled steel prices (delivered to U.S. ports) and domestic hot rolled coil prices (FOB domestic mills). This is only a “theoretical” calculation as freight costs, trader margin and other costs can fluctuate, ultimately influencing the true market spread. We are comparing the SMU U.S. hot rolled weekly index to CRU hot rolled weekly indices for Germany, Italy and Far East Asian ports.

SMU includes a 25 percent import tariff effective on foreign prices after March 23, 2018. We then add $90 per ton to the foreign prices in consideration of freight costs, handling, trader margin, etc., to provide an approximate “CIF U.S. ports price” that can be compared against the SMU U.S. hot rolled price. Note that we do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, Nov. 18, the CRU Far East Asian HRC price rose $10 per ton over last week at $513 per net ton, $28 higher than the price two weeks ago. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $731 per ton. The latest SMU hot rolled price average is $730 per ton, up $20 over last week and up $30 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $1 per ton cheaper than imported Far East Asian HRC; foreign prices held a brief advantage two weeks ago ($4), but were previously more expensive than domestic prices for over a year and a half. In mid-August, domestic HRC held a record high $220 per ton price advantage over Far East Asian HRC.

German HRC

The latest CRU German HRC price is $566 per net ton, up $8 from the previous week and up $27 from two weeks prior. Adding tariffs and import costs, that puts the German price at $798 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $68 per ton cheaper than imported German HRC. U.S. prices have now held this competitive price advantage for two years. In mid-August, domestic HRC held a record high $215 per ton price advantage over German imports.

Italian HRC

CRU published Italian HRC prices at $537 per net ton, up $11 from last week and up $26 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $761 per ton. Accordingly, domestic HRC is theoretically $31 per ton cheaper than imported Italian HRC. U.S. prices have held this price advantage for over a year and a half.  Recall the record high in mid-August when domestic HRC held a $176 per ton price advantage over Italian imports.

The graph below compares all four price indices and highlights the effective date of the tariffs. Foreign prices are referred to as “equalized,” meaning they have been adjusted to include tariffs and importing costs for a like-for-like comparison against the U.S. price.

Note: Freight is an important part of the final determination on whether to import foreign steel or buy from a domestic mill supplier. Domestic prices are referenced as FOB the producing mill, while foreign prices are FOB the Port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Inland freight, from either a domestic mill or from the port, can dramatically impact the competitiveness of both domestic and foreign steel. When considering lead times, a buyer must take into consideration the momentum of pricing both domestically and in the world markets. In most circumstances (but not all), domestic steel will deliver faster than foreign steel ordered on the same day.

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