Foreign vs. Domestic HRC Prices: Spread Continues to Narrow

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. 17, the CRU German HRC price was $597 per net ton, unchanged from the previous week and down $2 from two weeks prior. Adding $90 per ton for import costs, that puts the price at $687 per ton from Germany delivered to the U.S. The latest Steel Market Update hot rolled price average is $805 per ton for domestic steel, down $30 over last week and down $35 from two weeks ago. The spread between German and U.S. HR prices is now +$118 per ton, down from +$148 last week, and down from +$151 two weeks ago. That means domestic HR is now theoretically $118 per ton more expensive than importing HR steel from Germany. The spread has declined $34 in total over the last month and $94 over the last two months. The four-week average price spread is now +$143 per ton, down $8 from last week.

CRU published Italian HRC prices at $548 per net ton, down $5 over last week and down $11 compared to two weeks ago. After adding import costs, we get a delivered price of approximately $638 per ton. The spread between the Italy and U.S. figure is +$167 per ton, down from +$192 one week ago and down from +$191 two weeks ago. Meaning that U.S. HR is theoretically $167 per ton more expensive than importing steel from Italy. The spread has declined $24 over the last month and $77 over the past two months. The four-week average is now +$185, down $6 over last week.

The CRU Far East HRC price remained unchanged over last week at $517 per net ton, also unchanged 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 +$198 per ton, down from +$228 last week, and down from +$233 from two weeks ago. That means domestic HR would theoretically be $198 per ton more expensive than importing steel from East or Southeast Asia. The spread has declined $31 in total over the last month and $62 over the last two months. The four-week average price spread is now +$224 per ton, down $8 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.