SMU HRC vs Galv Price Analysis: Premium at 5-Month Low

SMU’s hot rolled coil price averaged $780 per ton ($39.00 per cwt) last week and has declined 18 of the past 20 weeks. Recall our index had reached a record-high $1,955 per ton in Sept. 2021. It hit a 21-month low of $770 per ton two weeks ago. Our latest galvanized price index averaged $1,105 per ton ($55.25 per cwt) last week and has decreased 19 of the past 20 weeks. Galvanized prices peaked at $2,185 per ton last September and reached a 20-month low of $1,100 per ton two weeks ago.

As shown in the graph below, galvanized held a premium of $80-$220 per ton over hot rolled for the last few years, exceeding that range in late 2021. Recall the premium rapidly rose to a peak of $545 per ton in mid-February, falling almost as quickly thereafter to reach a low of $300 per ton on March 22. The premium this week is $325 per ton, a 24-week low. The average premium in August was $355 per ton, down from $448 per ton in July and down from $456 per ton in June.

To better compare this price spread, we graphed the galvanized price premium over hot rolled as a percentage of the hot rolled price. This is an attempt to paint a clearer comparison against historical pricing data. As shown in the graphic below, the percentage premium is not as alarming compared to the dollar value premium. But it is still significantly higher compared to most past cycles. Galvanized prices held an average premium of 24% above hot rolled prices from 2017 through the end of 2021. In 2021, that premium averaged just 13%, while 2022 YTD now averages 38%. The premium rose to a (then) record high in February 2022 of 50%. We surpassed that high in July at 52%. The latest premium has eased to 42% but remains high historically. The average premium in August was 45%, compared to 50% in July and 42% in June.

By Brett Linton, Brett@SteelMarketUpdate.com