Domestic vs Foreign HRC Prices: Slipping Domestic Advantage?

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 antidumping (AD) or countervailing duties (CVD) in this analysis.

German HRC

As of Wednesday, Sept. 23, the CRU German HRC price was $513 per net ton, up $9 from the previous week and up $21 from two weeks prior. Adding tariffs and import costs, that puts the German price at $731 per ton delivered to the U.S. The latest SMU hot rolled price average is $600 per ton, up $20 over last week and up $60 over two weeks prior. Therefore, domestically sourced HRC is theoretically $131 per ton cheaper than imported German HRC; the spread was $140 last week and $165 two weeks ago. Recall the record high spread of $215 seen on Aug. 12. U.S. prices have held this price advantage for over a year and a half.

Italian HRC

CRU published Italian HRC prices at $492 per net ton, up $12 from last week and up $21 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $705 per ton. Accordingly, domestic HRC is theoretically $105 per ton cheaper than imported Italian HRC; the spread was $110 the previous week and $139 two weeks prior. Recall the record high spread of $176 also seen in mid-August. U.S. prices have held this price advantage for over one year.

Far East Asian HRC

The CRU Far East Asian HRC price fell $9 per ton over last week to $472 per net ton, $18 lower than the price two weeks ago. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $680 per ton. Therefore, U.S.-produced HRC is theoretically $80 per ton cheaper than imported Far East Asian HRC; the spread was $111 last week and $163 two weeks ago. Domestic prices have held this price advantage for over a year and a half.

The graph below compares all four price indices 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.