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Spread Between Hot Rolled and Galvanized Prices Eases

Written by Brett Linton

The spread between hot-rolled coil (HRC) and galvanized coil base prices continues to decline, now the lowest level recorded in almost 14 months.

The relationship between hot rolled and galvanized prices has been volatile since late 2021. In the last year, galvanized has sold at a premium of as little as $250 per ton ($12.50 per cwt) over hot rolled to as high as $545 per ton ($22.25 per cwt). The premium reached a record high in February, quickly narrowed in March, rebounded over the summer months, and has since declined (Figure 1).

SMU’s HRC price averaged $625 per ton ($31.25 per cwt) on Tuesday of last week. One week prior our HRC index was $615 per ton, the lowest level seen since September 2020.

Recall our index reached a record-high just over a year ago, peaking at $1,955 per ton in September 2021. Our latest galvanized price index averaged $825 per ton ($41.25 per cwt) last week, having declined 30 of the past 32 weeks. Galvanized prices are now at the lowest levels since October 2020, peaking at $2,185 per ton last September.

As shown in Figure 2, galvanized held a premium between $80–220 per ton over hot rolled for the last few years, exceeding that range in late 2021. 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. After bouncing back up to the high $400s over the summer months, the premium has been declining since.

The premium this week is $200 per ton, almost a 14-month low. The average premium in November was $228 per ton, down from $290 in October and down from $323 in September. November 2021 averaged $253 per ton, while November 2020 averaged $180.

To better compare these two products, we calculated the galvanized price premium over hot rolled as a percentage of hot rolled prices, as shown in Figure 3. This is an attempt to paint a clearer comparison against historical pricing data.

The percentage premium is not as alarming as the dollar value premium, but it is still significantly higher than in previous years. Galvanized prices held an average premium of 24% above HRC prices from 2017 through the end of 2021. In 2021, the premium averaged just 13%, while through the first eleven months of 2022 it now averages 38%.

The premium reached a record high of 52% in July 2022. The latest premium has eased to 32%. The average premium in November was 35%, down from 39% in October and 41% in September.

By Brett Linton,

Brett Linton

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