International Steel Prices

Foreign vs Domestic HRC Price Analysis

Written by Brett Linton

This week, foreign hot-rolled coil (HRC) offers little to no cost advantage over domestic steel, according to Steel Market Update’s latest analysis. Foreign prices now hold a theoretical discount of 0–1% over domestic steel, after adjusting foreign prices for estimated freight costs, trader margins, and tariffs. This relationship has teetered back and forth lately, with prices from all regions remaining within ~$16 per ton of each other over the past four weeks. The gap between US and foreign prices has been narrowing since May.

SMU uses the following calculation to identify the theoretical spread between foreign HRC prices (delivered to US ports) and domestic HRC prices (FOB domestic mills). Our analysis compares the SMU US HRC weekly index to the CRU HRC weekly indices for Germany, Italy, and Far East Asian ports. This is only a theoretical calculation because costs to import can vary greatly and often fluctuate, which influences the true market spread.

In consideration of freight costs, handling, and trader margin, we add $90 per ton to all foreign prices to provide an approximate “CIF US ports price” that can be compared against the SMU domestic HRC price. Buyers should use our $90 per ton figure as a benchmark, adjusting it as necessary based on their own shipping and handling costs. If you have experience importing foreign steel and want to share your thoughts on these costs, we welcome your insight and comments:

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, Oct. 19, the CRU Far East Asian HRC price declined $18 week-over-week to $508 per net ton ($560 per metric ton), down $27 per ton compared to 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 $725 per ton. The latest SMU hot-rolled average is $730 per ton, down $10 week-over-week and down $40 compared to one month ago.

Therefore, US-produced HRC is now only $5 per ton more expensive than steel imported from Far East Asia. We saw the opposite situation last week, when US prices were theoretically $8 per ton cheaper than Asian imports (the first time since March). One month ago, Far East Asian prices held a potential discount of $11 per ton to domestic steel. The differential peaked earlier this year at $375 per ton in May, when Far East Asian prices held a considerable advantage. The widest price advantage for Far East Asian prices was just over a year ago, at $847 per ton in September 2021.

Italian HRC

CRU published Italian HRC prices at $639 per net ton ($705 per metric ton) this week, down $13 per ton compared to last week, and down $75 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $729 per ton.

Domestic HRC is now theoretically $1 per ton more expensive than imported Italian HRC. Prices from these regions have been within $10 of each other for the past four weeks. Last week, domestic prices held the advantage by $2 per ton, and the two regions had identical prices during the previous week. One month ago, US steel held an advantage of $35 per ton over Italian prices. The highest spread this year was $200 per ton in May. Before the 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

CRU’s latest German HRC price decreased $25 per ton from last week to $640 per net ton ($706 per metric ton), down $81 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $730 per ton.

Accordingly, domestic HRC is now theoretically the exact same cost as imported German HRC. Last week, domestic steel offered a potential savings of $15 per ton over German steel, down from $41 per ton one month ago. Prior to this week, domestic HRC has had held the price advantage for all but two weeks since late July. German HRC held the price advantage for the three months prior to that, having reached a 2022 high of $164 per ton in May. Prior to the removal of the 25% tariff, the October 2021 spread of $504 per ton was the widest 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.

Notes: 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, domestic steel will deliver faster than foreign steel ordered on the same day.

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.

By Brett Linton,

Brett Linton

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