Foreign vs. Domestic HRC Price Analysis: Strong Foreign Advantage

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. 15, the CRU Far East Asian HRC price increased $9 per ton to $826 per net ton ($910 per metric ton), up $27 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,122 per ton. The latest SMU hot rolled price average is $1,950 per ton, down $5 from one week ago, but up $15 compared to two weeks prior. Therefore, U.S.-produced HRC theoretically is now $828 per ton more expensive than imported Far East Asian HRC, down from $844 last week, and down from $847 two weeks ago. The $847 spread seen two weeks ago was the largest theoretical spread between Far East Asian and domestic HRC prices in SMU’s four-year history. Prior to 2021, the previous record high was $183 per ton in March 2018.

Italian HRC

CRU published Italian HRC prices at $1,092 per net ton ($1,203 per metric ton), down $16 from last week, and down $18 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,455 per ton. Accordingly, domestic HRC is theoretically $495 per ton more expensive than imported Italian HRC, up from $481 the week prior, and up from $458 two weeks ago. This is now the largest price spread in our history (we have seen a new record spread each of the last nine 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 $1,221 per net ton ($1,346 per metric ton), down $25 from last week, and down $4 from two weeks ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,617 per ton. Accordingly, domestic HRC is theoretically $333 per ton more expensive than imported German HRC, up from $307 last week, and up from $313 two weeks ago. This is now the largest price spread in our history (we have seen a new record spread six of the past nine 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