International Steel Prices

Domestic HRC Cheaper Than Imports, Spread Widens

Written by Brett Linton

Domestic hot-rolled coil (HRC) continues to hold the upper hand over imported steel when it comes to price, according to Steel Market Update’s latest foreign versus domestic price analysis. US HRC is approximately 4–7% cheaper than foreign prices this week, after consideration of freight costs, trader margins and any applicable tariffs. Prior to this week, the relationship between foreign and domestic prices had remained within $18 per ton of each other for six weeks. The gap between US and foreign prices has been narrowing overall 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, Nov. 9, the CRU Far East Asian HRC price held steady week-over-week at $485 per net ton ($535 per metric ton), down $41 from levels 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 $697 per ton. The latest SMU hot rolled average is $655 per ton, down $30 from last week and down $85 compared to one month ago.

Therefore, US-produced HRC is now $42 per ton cheaper than steel imported from Far East Asia. This is the largest price appeal that domestic HRC has had over Far East Asian steel since early March. Last week US prices were theoretically $12 per ton cheaper than Asian imports, and one month ago domestic prices held a discount of $8 per ton. Prior to the last month, Far East Asian prices had held the advantage since mid-March; the differential peaked at $375 per ton in May. The widest price advantage for Far East Asian prices was just over a year ago, at $847 per ton in September 2021.

Italian HRC

Italian HRC prices declined to $594 per net ton ($655 per metric ton) this week, $10 less than the week prior and $58 less than from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $684 per ton.

Domestic HRC is now theoretically $29 per ton cheaper than imported Italian HRC. This is the widest spread seen since mid-September, when domestic prices held a potential discount of $35 per ton. Last week the spread was $9 per ton (with US prices holding the advantage). One month ago, prices between these two regions were just $2 apart. The highest spread this year was $200 per ton in May, when Italian prices held a considerable advantage. Before the removal of the 25% Section 232 tariff, the spread one year ago reached $577 per ton in November, the largest in SMU’s data history.

German HRC

CRU’s latest German HRC price remained unchanged week-over-week at $613 per net ton ($675 per metric ton), down $51 versus levels one month ago. After adding import costs, the delivered price of German HRC is approximately $703 per ton.

Accordingly, domestic HRC is now theoretically $48 per ton cheaper than imported German HRC. In the two weeks prior, domestic steel held a $13–18 per ton advantage over German HRC. Three weeks ago prices between these two regions were identical, and one month ago domestic prices held a discount of $15 per ton. Domestic HRC has held this price advantage for all but three 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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