World vs. US HRC Price Spread Shrinking

The world export price for hot rolled bands is $429 per net ton ($473 per metric ton) FOB the port of export according to data released by SteelBenchmarker on Monday of this week. This is down $10 per ton from the previous release in late-January and down $19 per ton from mid-January.

SMU uses a minimum of $70 to as much as $100 per ton which is then added to the export number in order to get the steel to ports in the United States (freight, handling, and trader margin). This additional cost more closely mirrors the “true” world HR export price ranging from $499 to $529 per ton CIF USA Port.

The latest Steel Market Update hot rolled price average is $510 per ton for domestic steel; this is down $30 from late-January and down $60 per ton from mid-January. The theoretical spread between the world HR export price and the SMU HR price is $-19 to $11 per ton ($81 prior to import costs), down $20 per ton from our previous analysis and down $41 from mid-January.

The -$19 to $11 spread is the lowest seen since late-May 2013 when we had a spread of -$20 to $10 per ton ($80 prior to import costs). Over the summer we reached a spread of $84 to $114 per ton ($184 prior to import costs). One year ago the spread was $45 to $75 per ton ($145 prior to import costs).

The above numbers are based on “theoretical” calculations. Where prices and price offers “should” be if the world export number is correct (and we question the validity of the number this week)

Steel Market Update has been hearing reports of foreign hot rolled offers into the port of Houston of $460 to $500 per net ton. This is outside of our range and suggests that the SteelBenchmarker number may be incorrect and the export numbers may be lower than what they have reported. Not taking freight into consideration this puts the spread at $10 to $50 per ton which is not large enough for most buyers to make commitments (which is what we are hearing from traders, the $460 to $480 offers are not generating any orders).

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.

Below is an interactive graph which you can use to compare world HR export prices against the SMU domestic HR average price. We also have included a comparison with freight and traders’ costs added which gives you a better indication of the true price spread. You will need to read this article on our website in order to see and interact with the graphic. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.

{amchart id=”130″ Domestic vs. Foreign Hot Rolled Pricing- Steel Benchmarker World China Europe Prices}