HR vs. galvanized price spread trending back down

SMU’s average hot-rolled coil (HRC) price eased $5 per short ton (st) this week to $840/st. Prices have trended lower since late March, though the pace of declines has slowed in recent weeks.

Our galvanized index also declined $5/st this week to $1,010/st (base). Galvanized prices have eased since their mid-March peak, with some loss of momentum in the last two weeks.

Figure 1 shows the pricing relationship between these two products since 2022.

Galvanized premium shrinking

Galvanized prices have fallen slightly faster than HRC in recent weeks. Currently, galvanized commands a $170/st price premium over HRC, one of the lowest differentials seen since mid-March (Figure 2, left). Spreads over the past month resemble those from earlier this year. Back in late January and mid-March we saw spread shrink to $150/st three times, the lowest seen since the summer of 2023.

One year ago we saw spreads as high as $310/st, though over the last 12 months it has averaged $207/st. Historically, we saw pre-pandemic spreads mostly between $85-220/st in the 2010s.

Another way to compare these products is to look at the galvanized premium as a percentage rather than a dollar value. The right graph in Figure 2 shows the hot-rolled/galvanized price spread as a percentage of the hot rolled price.

The percentage premium tells a similar story; it has shifted lower overall for almost a year, falling to a three-month low of 20% this week. It recently fell as low as 16% for one week in March. The premium had climbed to a near two-year high of 44% last June, an upwards trend generally witnessed since March 2023 (when it got as low as 9%).

This time last year, the premium was significantly higher at 38%. Prior to the pandemic volatility, galvanized prices held an average premium of 24% above hot-rolled prices from 2017 through the end of 2021. The premium reached a record high of 52% in July 2022.