International Steel Prices
Foreign vs. Domestic: Imported HR Prices on the Increase
Written by Brett Linton
April 29, 2021
Foreign hot rolled steel prices remain attractive compared to steel sourced domestically, albeit at a lesser potential discount than 1-2 months ago, as foreign import prices are now increasing at a greater rate than domestic prices. U.S. buyers continue to place orders for foreign material despite long lead times for delivery. Foreign prices still hold potential discounts of 4-19%, according to Steel Market Update’s latest foreign versus domestic hot rolled steel price comparison. The peak of potential discounts occurred in mid-February for Far East Asian prices, and in early to mid-March for German and Italian products.
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. This compares 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% 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, April 28, the CRU Far East Asian HRC price increased $27 over the previous week to $862 per net ton ($950 per metric ton), also up $27 per ton over two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,167 per ton. The latest SMU hot rolled price average is $1,440 per ton, up $30 over last week and up $70 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $273 per ton more expensive than imported Far East Asian HRC, down from $277 last week, but up from $237 two weeks ago. The largest theoretical spread this year between Far East Asian and domestic HRC prices was $373 in mid-February.
Italian HRC
CRU published Italian HRC prices at $1,036 per net ton ($1,142 per metric ton), up $44 from last week, and up $94 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,385 per ton. Accordingly, domestic HRC is theoretically $55 per ton more expensive than imported Italian HRC, down from $79 last week and down from $102 two weeks ago. The largest theoretical spread this year between Italian and domestic HRC prices was $210 in mid-March.
German HRC
The latest CRU German HRC price is $1,036 per net ton ($1,142 per metric ton), up $38 from the previous week and up $88 from two weeks prior. Adding tariffs and import costs, that puts the German price at $1,385 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $55 per ton more expensive than imported German HRC, down from $72 last week and down from $95 two weeks ago. The largest theoretical spread this year between German and domestic HRC prices was $172 in early March.
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.
By Brett Linton, Brett@SteelMarkeUpdate.com
Brett Linton
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