Overseas
April 16, 2015
Analysis of World Export vs. Domestic Hot Rolled Coil Price Spread
Written by Brett Linton
The spread between world hot rolled export pricing and that of the domestic average here in the United States continues to be reduced from what we were measuring a couple of months ago. This analysis is based on our review of world export prices and the hot rolled index produced by SMU earlier this week. As the spread narrows, the competitiveness of imported steel into the United States is reduced. Over time, if the trend continues, the domestic (U.S. and Canadian) steel mills will be in a better position to regain some of the market share lost to foreign steel imports, especially on flat rolled steel products in the coming months (second half 2015).
The following calculation is used by Steel Market Update in order to identify the spread between world hot rolled export prices as determined by SteelBenchmarker and domestic (US) hot rolled prices determined by SMU. SMU compares the world hot rolled export price to which dollars are added for freight, handling, trader margin, etc. The number generated is then compared to the spot (FOB Mill) domestic hot rolled price using the SMU Hot Rolled Index average for this week, with the result being the spread between domestic and world hot rolled coil (HRC) pricing. This is a “theoretical” calculation as freight costs, trader margin and other costs can fluctuate.
