The price advantage domestic hot-rolled coil (HRC) had enjoyed over offshore hot band has evaporated as US mills drive prices higher, according to Steel Market Update’s latest foreign vs. domestic price analysis.
Nucor and ArcelorMittal last week announced a target price $1,150 per ton ($57.50 per cwt) for HRC. Market contacts have told SMU that some mills seeking as high as $1,200 per ton. SMU’s prices this week reflected those new, higher base prices as well as four waves of price hikes announced over the last month.
US HRC had held a price advantage over foreign hot band for 16 consecutive weeks. But that trend has shifted over the past three weeks as domestic HRC prices continue to rise at a much faster clip than tags abroad.
Domestic hot band is now roughly 19% more expensive than foreign material. That premium is wider than last week, when domestic HRC was ~8% more costly than imported product.
US prices had been cheaper than foreign prices for the three regions we follow (Asia, Italy, and Germany) since the beginning of November after adding freight costs, trader margins, and applicable tariffs. That changed when US HRC prices rose $155 per ton in February. US prices have since shot up another $140 per ton this month.
Domestic HRC held, on average, an $18-per-ton advantage over imported hot band as recently as mid-February. That has flipped to a $203-per-ton disadvantage this week as US prices have continued to soar.
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 eastern and south-eastern Asian ports. This is only a theoretical calculation because costs to import can vary greatly, influencing 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 to compare to the SMU domestic HRC price. Buyers should use our $90-per-ton figure as a benchmark and adjust up or down based on their own shipping and handling costs. If you import steel and want to share your thoughts on these costs, we welcome your insight at firstname.lastname@example.org.
Asian Hot-Rolled Coil (East and Southeast Asian Ports)
As of Thursday, March 9, the CRU Asian HRC price increased by $4 per ton to $621 per net ton ($685 per metric ton), and was up $27 per ton from levels one month prior. Adding a 25% tariff, and $90 per ton in estimated import costs, the delivered price of Asian HRC to the US is $867 per ton. The latest SMU hot-rolled average is $1,075 per ton, up $140 per ton from our previous price update, and up $265 per ton compared to our price one month ago.
US-produced HRC is now theoretically $208 per ton more costly than steel imported from Asia. This is a reversal from just three weeks ago, when domestic HRC had a $13-per-ton advantage over HRC from Asian markets.
Just two months ago, we saw a $76-per-ton spread advantage for US HRC, among the biggest price advantages domestic HRC has had over Asian HRC in recent years.
The widest price advantage for Asian hot band was recorded nearly 16 months ago: $847 per ton in September 2021.
Italian Hot-Rolled Coil
Italian HRC prices increased by $12 per ton WoW to $770 per net ton ($848 per metric ton) this week, and are $31 per ton higher month on month (MoM). After adding import costs, the delivered price of Italian HRC is approximately $860 per ton.
Domestic HRC is now theoretically $215 per ton more expensive than imported Italian HRC. That spread is up $128 per ton WoW and represents a nearly $227-per-ton reversal compared to three weeks ago when US HRC was $12 per ton cheaper than Italian product. Just about a month ago, US HRC was in theory $48 per ton cheaper than imported Italian hot band.
German Hot-Rolled Coil
CRU’s latest German HRC price rose by just $25 per ton WoW to $800 per net ton ($882 per metric ton) and is up $44 per ton MoM. After adding import costs, the delivered price of German HRC is roughly $890 per ton.
Domestic HRC is now theoretically $185 per ton more expensive than imported German HRC. That’s a swing of $220-per-ton turn given that US hot band held a $29-per-ton advantage over domestic hot band just a month ago.
US HRC had held a price advantage over German product for all but three weeks since late July.
Figure 4 compares all four price indices and highlights the effective date of the tariffs. The chart on the left shows historical variation from Jan. 1, 2021, through present. The chart on the right zooms in to highlight the recent decoupling of US and offshore HRC prices.
Notes: Freight is an important consideration in deciding whether to import foreign steel or buy from a domestic mill. 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. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel.
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 David Schollaert, email@example.com
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