Foreign vs. Domestic HRC Prices: High Spread Slowly Shrinking

SMU adds $90 per ton to these foreign prices taking into consideration freight costs, handling, trader margin, etc. This provides an approximate “CIF U.S. ports price” that can then be compared against the SMU U.S. hot rolled price, with the result being the spread (difference) between domestic and foreign hot rolled prices. As the price spread narrows, the competitiveness of imported steel into the United States is reduced. If the spread widens, then foreign steel becomes more attractive to U.S. flat rolled steel buyers. A positive spread means U.S. prices are higher than foreign prices, while a negative spread means U.S. prices are less than foreign prices.

As of Wednesday, Oct. 3, the CRU German HRC price was $599 per net ton, down $8 from the previous week and down $9 from two weeks prior. Adding $90 per ton for import costs, that puts the price at $689 per ton from Germany delivered to the U.S. The latest Steel Market Update hot rolled price average is $840 per ton for domestic steel, down $10 over both last week and two weeks ago. The spread between German and U.S. HR prices is now +$151 per ton, down from +$153 last week, and down from +$152 two weeks ago. That means domestic HR is now theoretically $151 per ton more expensive than importing HR steel from Germany. The spread has declined $23 in total over the last month and $65 over the last two months. The four-week average price spread is now +$152 per ton, down $6 from last week.

CRU published Italian HRC prices at $559 per net ton, down $12 over last week and down $10 compared to two weeks ago. After adding import costs, we get a delivered price of approximately $649 per ton. The spread between the Italy and U.S. figure is +$191 per ton, up from +$189 one week ago and unchanged from two weeks ago. Meaning that U.S. HR is theoretically $191 per ton more expensive than importing steel from Italy. Prior to this past week, the Italian price spread had declined for nine consecutive weeks. The spread has declined $16 over the last month and $62 over the past two months. The four-week average is now +$191, down $4 over last week.

The CRU Far East HRC price fell $5 per ton over last week to $517 per net ton, down $14 from two weeks prior. Adding import costs, that puts the price at $607 per ton. The spread between the Far East and U.S. figure is +$233 per ton, down from +$238 last week, but up from +$229 from two weeks ago. That means domestic HR would theoretically be $233 per ton more expensive than importing steel from East or Southeast Asia. The spread has declined $7 in total over the last month and $34 over the last two months. The four-week average price spread is now +$232 per ton, down $2 from last week.

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.