Foreign HRC Price Update: Spreads Shrinking

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 anti-dumping (AD) or countervailing duties (CVD) in this analysis.

German HRC

As of Wednesday, Nov. 13, the CRU German HRC price was $421 per net ton, down $9 from the previous week and down $20 from two weeks prior. Adding tariffs and import costs, that puts the German price at $616 per ton delivered to the U.S. The latest SMU hot rolled price average is $520 per ton, up $30 over last week and up $40 from two weeks prior. Therefore, domestically sourced HRC is theoretically $96 per ton cheaper than imported German HRC; the spread was $138 last week and $161 two weeks ago. The last time the price spread was this small was late August. U.S. prices have held this price advantage for 52 consecutive weeks now.

Italian HRC

CRU published Italian HRC prices at $392 per net ton, down $5 over last week and down $12 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $580 per ton. Therefore, domestic HRC is theoretically $60 per ton cheaper than imported Italian HRC; the spread was $96 the previous week and $115 two weeks prior. This is the smallest spread seen since mid-May of this year. U.S. prices have now held the price advantage for 32 consecutive weeks.

Far East Asian HRC

The CRU Far East HRC price rose $12 over last week at $395 per net ton, up $19 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East HRC to the U.S. is $584 per ton. Therefore, U.S. produced HRC is theoretically $64 per ton cheaper than imported Far East Asian HRC; the spread was $79 last week and $80 two weeks ago. The last time the spread was this small was late-September. Domestic prices have held this price advantage for 40 consecutive weeks.

The graph below compares all four price indicies 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.