Foreign vs. Domestic HRC Price Analysis: Foreign Appeal Fading

In consideration of freight costs, handling, trader margin, etc., we add $90 per ton to all foreign prices to provide an approximate “CIF US ports price” that can be compared against the SMU US HRC price. Spot checks show freight for Southeast Asian imports into Houston costing between $100–110 per ton, costs for European products between $80–120 per ton, and costs for Turkish steel around $150 per ton. Buyers should use our $90-per-ton figure as a benchmark and adjust up or down based on their own shipping and handling costs as necessary.

If any of our readers have experience importing foreign steel and want to share your thoughts on these costs, we welcome any comments: Brett@SteelMarketUpdate.com.

Note that effective Jan. 1, 2022, the traditional Section 232 tariff no longer applies to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25% tariff. SMU still includes the 25% S232 tariff on foreign prices from other countries. 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, July 27, the CRU Far East Asian HRC price was flat week-over-week at $544 per net ton ($600 per metric ton), down $73 per ton from one month prior. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Far East Asian HRC to the US is $770 per ton. The latest SMU HRC price average is $840 per ton, down $35 compared to one week prior and down $155 per ton from one month ago. Therefore, US-produced HRC is now theoretically $70 per ton more expensive than imported Far East Asian HRC, down from a spread of $105 per ton last week and down from $134 per ton one month ago. This differential has gradually eased since peaking at $375 per ton in early May. This is the 20th consecutive week foreign steel prices have held this price advantage. The largest price spread between these regions was $847 per ton in September 2021, when Far East Asian prices held a considerable advantage.

Italian HRC

CRU published Italian HRC prices at $692 per net ton ($763 per metric ton), down $12 per ton from last week and down $122 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $782 per ton. Accordingly, domestic HRC is now theoretically $58 per ton more expensive than imported Italian HRC, down from $81 per ton one week prior and down from $91 per ton four weeks ago. The highest spread this year was $200 per ton in mid-May. This is the 19th consecutive week foreign steel prices have held this price advantage. Prior to removal of the 25% Section 232 tariff, the November 2021 spread of $577 per ton was the largest in SMU’s data history.

German HRC

The latest CRU German HRC price is $765 per net ton ($843 per metric ton), down $6 per ton from last week and down $79 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $855 per ton. Accordingly, domestic HRC is now theoretically $15 per ton cheaper than imported German HRC. Prior to this week, German prices held this price advantage for 14 consecutive weeks; the spread was $14 per ton one week prior, $61 per ton four weeks ago, and had reached a 2022 high of $164 in mid-May. Prior to removal of the 25% tariff, the October 2021 spread of $504 per ton was the largest seen in SMU’s data history.

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 importing costs (and tariffs in some cases) for a like-for-like comparison against the US 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 CIF 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