Foreign vs Domestic HRC Prices: Imports' Advantage Narrowing

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, May 19, the CRU Far East Asian HRC price decreased $18 over the previous week to $916 per net ton ($1,010 per metric ton), up $45 per ton over two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,235 per ton. The latest SMU hot rolled price average is $1,570 per ton, up $30 over last week and up $70 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $335 per ton more expensive than imported Far East Asian HRC, up from $282 last week, and up from $321 two weeks ago. This spread has reversed it’s course over the last few weeks, as the potential discount held by Far East Asian HRC imports was shrinking from mid-February through mid-April. 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 $1,155 per net ton ($1,274 per metric ton), up $58 from last week, and up $99 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,534 per ton. Accordingly, domestic HRC is theoretically $36 per ton more expensive than imported Italian HRC, down from $79 last week and down from $90 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 $1,164 per net ton ($1,283 per metric ton), up $52 from the previous week and up $93 from two weeks prior. Adding tariffs and import costs, that puts the German price at $1,545 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $25 per ton more expensive than imported German HRC, down from $59 last week and down from $71 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