International Steel Prices
Foreign vs. Domestic Hot Rolled Steel Price Comparison
Written by Brett Linton
February 20, 2020
After the early-February blip when SMU reported the foreign versus domestic hot rolled price spread as slightly widening, we now see that foreign prices have declined a bit more than domestic prices. As a result, the price advantage held by U.S.-produced HRC has begun to shrink again, meaning foreign import prices are somewhat more attractive to U.S. buyers, but still well behind.
The following calculation is used by Steel Market Update to identify the theoretical spread between foreign hot rolled steel prices (delivered to U.S. ports) and domestic hot rolled coil prices (FOB domestic mills). We want our readers to be aware that this is only a “theoretical” calculation as freight costs, trader margin and other costs can fluctuate, ultimately influencing the true market spread.
We are comparing the SMU U.S. hot rolled weekly index to CRU hot rolled weekly indices for Germany, Italy and the Far East (East and Southeast Asian port).
SMU includes a 25 percent import tariff effective on foreign prices after March 23, 2018. We then add $90 per ton to the foreign prices in consideration of freight costs, handling, trader margin, etc., to provide an approximate “CIF U.S. ports price” that can be compared against the SMU U.S. hot rolled price. Note that we do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.
German HRC
As of Wednesday, Feb. 19, the CRU German HRC price was $467 per net ton, down $2 over the previous week and down $12 from two weeks prior. Adding tariffs and import costs, that puts the German price at $674 per ton delivered to the U.S. The latest SMU hot rolled price average is $580 per ton, unchanged over last week, but down $5 from two weeks prior. Therefore, domestically sourced HRC is theoretically $94 per ton cheaper than imported German HRC; the spread was $96 last week and $104 two weeks ago. U.S. prices have held this price advantage for 66 consecutive weeks.
Italian HRC
CRU published Italian HRC prices at $436 per net ton, down $7 from last week and down $15 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $635 per ton. Therefore, domestic HRC is theoretically $55 per ton cheaper than imported Italian HRC; the spread was $64 the previous week and $69 two weeks prior. U.S. prices have held the price advantage for 46 consecutive weeks.
Far East Asian HRC
The CRU Far East Asian HRC price fell $6 over last week to $429 per net ton, down $26 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $626 per ton. Therefore, U.S.-produced HRC is theoretically $46 per ton cheaper than imported Far East Asian HRC; the spread was $54 last week and $74 two weeks ago. Domestic prices have held this price advantage for 54 consecutive weeks.
The graph below 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 tariffs and importing costs for a like-for-like comparison against the U.S. price.
Note: 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 FOB 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 (but not all), domestic steel will deliver faster than foreign steel ordered on the same day.
Brett Linton
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