Domestic hot-rolled coil (HRC) continues to hold a competitive price advantage over imported steel, though that advantage is slightly easing, according to our latest analysis. US HRC is theoretically 3–13% cheaper than foreign prices this week, after consideration of freight costs, trader margins, and any applicable tariffs. This is the seventh consecutive week domestic prices have been cheaper than foreign prices for all three regions we follow. HRC prices increased across the board week over week, though marginally more in the US than foreign regions. This resulted in the average spread shrinking from $68 per ton last week to $51 per ton this week.
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: Brett@SteelMarketUpdate.com.
Far East Asian HRC (East and Southeast Ports)
As of Wednesday, Dec. 14, the CRU Far East Asian HRC price increased $18 per ton week over week to $535 per net ton ($590 per metric ton), up $45 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 $759 per ton. The latest SMU hot-rolled average is $670 per ton, up $30 from last week and up $40 compared to our price one month ago.
Therefore, US-produced HRC is now $89 per ton cheaper than steel imported from Far East Asia. Last week we saw a spread of $96 per ton, the largest price appeal that domestic HRC has had over Far East Asian HRC since September 2020. One month ago domestic prices held a discount of $72 per ton over foreign steel. Prior to October, Far East Asian prices had held the advantage since mid-March (the differential peaked at $375 per ton in May). The widest price advantage recorded for Far East Asian prices was just over a year ago, at $847 per ton in September 2021.
Italian HRC prices increased $10 per ton week over week to $597 per net ton ($658 per metric ton) this week, now in line with prices seen one month prior. After adding import costs, the delivered price of Italian HRC is approximately $687 per ton.
Domestic HRC is now theoretically $17 per ton cheaper than imported Italian HRC, down from $37 per ton last week. This is the smallest spread recorded since early November. One month ago the spread was $57 per ton, the largest margin in favor of US prices recorded since March. The largest 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 just over one year ago reached $577 per ton in November, the largest in SMU’s data history.
CRU’s latest German HRC price increased $6 per ton week over week to $627 per net ton ($691 per metric ton), the same as it was one month ago. After adding import costs, the delivered price of German HRC is approximately $717 per ton.
Accordingly, domestic HRC is now theoretically $47 per ton cheaper than imported German HRC, down from a spread of $71 per ton one week prior. This is now the smallest price spread seen between these regions since early November. Three weeks ago prices between these regions were $91 per ton apart (with US prices holding the advantage), the widest spread seen since March. One month ago, domestic prices held a discount of $87 per ton over foreign steel. 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.
Figure 4 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.
Figure 5 is an alternate version of Figure 4, focusing on HRC prices between July and today.
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% Section 232 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@SteelMarkeUpdate.com
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