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. 29, the CRU Far East Asian HRC price decreased $23 per ton to $789 per net ton ($870 per metric ton), down $37 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,077 per ton. The latest SMU hot rolled price average is $1,920 per ton, down $25 from one week ago, and down $30 compared to two weeks prior. Therefore, U.S.-produced HRC theoretically is now $843 per ton more expensive than imported Far East Asian HRC, up from $840 last week, and up from $828 two weeks ago. The $847 spread seen in early-September 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 $1,057 per net ton ($1,165 per metric ton), down $13 from last week, and down $35 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,411 per ton. Accordingly, domestic HRC is theoretically $509 per ton more expensive than imported Italian HRC, down from $517 the week prior, but up from $495 two weeks ago. Last week’s spread of $517 was the largest in our history (we had seen a new record spread each of the previous 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 $1,137 per net ton ($1,254 per metric ton), down $47 from last week, and down $84 from two weeks ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,512 per ton. Accordingly, domestic HRC is theoretically $408 per ton more expensive than imported German HRC, up from $375 last week, and up from $333 two weeks ago. This is now the largest price spread in our history (we have seen a new record spread eight of the past eleven 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