Environment and Energy

Offshore CRC Price Advantage Expands as US Tags Move Higher

Written by David Schollaert

Imports of cold-rolled coil (CRC) extended their pricing advantage over domestic product as US mills continued to drive prices higher, according to Steel Market Update’s latest foreign vs. domestic price analysis of the CRC market.

US mills have announced multiple rounds of price increases since the beginning of the year, widening the gap between US and foreign CRC. With lead times also extended, currently averaging eight weeks for cold-rolled, the advantage domestic CRC had enjoyed over offshore product appears to have dissipated.

Domestic cold-rolled is now roughly 34% more expensive than foreign material (except for Japan-origin CR, which is roughly 9% more expensive due to a 71% tariff). That premium is wider than just four weeks ago when domestic CRC was ~16% more costly than imported product.

US prices had been cheaper than foreign prices for two of the four regions we follow (Germany and Japan) since the beginning of the year after adding freight costs, trader margins, and applicable tariffs. That changed when US CRC prices rose $410 per ton since January, accentuated by another $255 per ton through the first week in March.

Domestic CRC held, on average, a $77-per-ton disadvantage over imported steel as recently as early February. That has swelled to a $367-per-ton disadvantage this week as US prices have continued to rise.

SMU uses the following calculation to identify the theoretical spread between foreign CRC prices (delivered to US ports) and domestic CRC prices (FOB domestic mills): Our analysis compares the SMU US CRC weekly index to the CRU CRC weekly indices for Germany, Italy, and eastern and south-eastern Asian ports (South Korea and Japan). 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 CRC 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 david@steelmarketupdate.com.

Asian Cold-Rolled Coil (South Korea and Japan theoretical)

As of Thursday, March 16, the CRU Asian CRC price increased by $9 per ton to $780 per net ton ($860 per metric ton) and was up $36 per ton from levels one month prior. Adding a 71% anti-dumping duty (Japan theoretical), and $90 per ton in estimated import costs, the delivered price to the US is $1,424 per ton, though the South Korean theoretical is $870 per ton. The latest SMU cold-rolled average is $1,305 per ton, up $105 per ton week on week (WoW), and up $255 per ton compared to our price one month ago.

US-produced CRC is now theoretically $119 per ton cheaper than steel imported from Japan but $435 per ton more costly than cold-rolled imported from South Korea. This is more than double the US competitive disadvantage of $216 per ton from a month ago vs. South Korean CRC.

ForeignVsDomestic Fig1

ForeignVsDomestic Fig2

Italian Cold-Rolled Coil

Italian CRC prices increased by $3 per ton WoW to $858 per net ton ($946 per metric ton) this week, and are $29 per ton higher month on month (MoM). After adding import costs, the delivered price of Italian CRC is approximately $948 per ton.

Domestic CRC is now theoretically $357 per ton more expensive than imported Italian CRC. That spread is up $102 per ton WoW and represents a nearly $292-per-ton boost compared to four weeks ago when US CRC was $65 per ton more expensive than Italian product.

ForeignVsDomestic Fig3

German Cold-Rolled Coil

CRU’s latest German CRC price rose by $6 per ton WoW to $907 per net ton ($1,000 per metric ton) and is up $41 per ton MoM. After adding import costs, the delivered price of German CRC is roughly $997 per ton.

Domestic CRC is now theoretically $308 per ton more expensive than imported German CRC. That’s a $214-per-ton jump from just a month ago.

The last time US CRC had held a price advantage over German product was late May 2021.

ForeignVsDomestic Fig4

Figure 5 compares all five 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 surge in US pricing.

ForeignVsDomestic Fig5

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 also have a big impact. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel – although that is less the case in the current market.

Effective Jan. 1, 2022, the traditional Section 232 tariff of 25% 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 Section 232 tariff on foreign prices from other countries where applicable.

By David Schollaert, david@steelmarketupdate.com

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