Gap Between Foreign and Domestic HRC Prices Beginning to Narrow

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, Dec. 15, the CRU Far East Asian HRC price decreased $9 per ton to $726 per net ton ($800 per metric ton), down $27 from one month prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $997 per ton. The latest SMU hot rolled price average is $1,670 per ton, down $60 from one week ago, and down $160 from one month prior. Therefore, U.S.-produced HRC theoretically is now $673 per ton more expensive than imported Far East Asian HRC, down from $721 last week, and down from $799 one month ago. Recall that the early-September spread of $847 per ton was the largest theoretical spread between Far East Asian and domestic HRC prices in SMU’s four-year data history. Prior to 2021, the previous record high was $183 per ton in March 2018.

Italian HRC

CRU published Italian HRC prices at $913 per net ton ($1,007 per metric ton), down $15 from last week, and down $29 from one month ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,232 per ton. Accordingly, domestic HRC is theoretically $438 per ton more expensive than imported Italian HRC, down from $480 the week prior, and down from $563 one month ago. The early-November spread of $577 per ton was the largest seen in our limited history. Prior to 2021, the previous record high was $143 per ton in July 2016. 

German HRC

The latest CRU German HRC price is $965 per net ton ($1,064 per metric ton), down $18 from last week, and down $62 from one month ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,297 per ton. Accordingly, domestic HRC is theoretically $373 per ton more expensive than imported German HRC, down from $410 last week, and down from $456 one month ago. The mid-October spread of $504 per ton was the largest seen in our limited history. Prior to 2021, the previous record high was $121 per ton in March 2018. 

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