Foreign Steel Gains Even Greater Edge Over Domestic Prices

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, Sept. 1, the CRU Far East Asian HRC price declined $18 per ton to $798 per net ton ($880 per metric ton), down $36 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,088 per ton. The latest SMU hot rolled price average is $1,935 per ton, up $20 over the previous two weeks. Therefore, U.S.-produced HRC theoretically is now $847 per ton more expensive than imported Far East Asian HRC, up from $804 last week, and up from $782 two weeks ago. This is now the largest theoretical spread between Far East Asian and domestic HRC prices in SMU’s four-year history (we have seen a new record spread each of the last 15 weeks). Prior to 2021, the previous record high was $183 per ton in March 2018.

Italian HRC

CRU published Italian HRC prices at $1,110 per net ton ($1,223 per metric ton), down $8 from last week, and down $32 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,477 per ton. Accordingly, domestic HRC is theoretically $458 per ton more expensive than imported Italian HRC, up from $428 the week prior, and up from $399 two weeks ago. This is now the largest price spread in our history (we have seen a new record spread each of the last seven weeks), surpassing the previous high of $210 per ton seen in mid-March 2021. Prior to 2021, the previous record high was $143 per ton in July 2016. Recall that in late-May/early-June, Italian HRC briefly lost its price advantage over domestic steel for two weeks.

German HRC

The latest CRU German HRC price is $1,225 per net ton ($1,351 per metric ton), up $5 from last week, but down $4 from two weeks ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,622 per ton. Accordingly, domestic HRC is theoretically $313 per ton more expensive than imported German HRC, up from $300 last week, and up from $289 two weeks ago. This is now the largest price spread in our history (we have seen a new record spread three of the past seven weeks), surpassing the previous high of $172 seen in mid-March 2021. Prior to 2021, the previous record high was $121 per ton in March 2018. Like Italian HRC, German HRC briefly lost its price advantage over domestic steel for two weeks in late-May/early-June.

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