Foreign HRC Holds Edge Over Domestic Prices

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.

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, Jan. 6, the CRU Far East Asian HRC price fell $9 per ton over last week to $599 per net ton, $45 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 $839 per ton. The latest SMU hot rolled price average is $1,010 per ton, up $25 over both last week and two weeks prior. Therefore, U.S.-produced HRC theoretically is now $171 per ton more expensive than imported Far East Asian HRC. Asian imports, which had been more expensive than domestic for more than a year and a half, gained their price advantage in November. In mid-August, domestic HRC held a record-high $220 per ton price advantage over Far East Asian HRC.

Italian HRC

CRU published Italian HRC prices at $703 per net ton, up $12 from last week and up $13 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $954 per ton. Accordingly, domestic HRC is theoretically $41 per ton more expensive than imported Italian HRC. Prior to December, U.S. prices had held the price advantage for over a year and a half. This price differential has been shrinking since mid-August, when domestic HRC held a record high $176 per ton price advantage over Italian imports.

German HRC

The latest CRU German HRC price is $728 per net ton, up $4 from the previous week and up $19 from two weeks prior. Adding tariffs and import costs, that puts the German price at $1,000 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $10 per ton more expensive than imported German HRC. Prior to December, U.S. prices had held the competitive price advantage for over two years. This price differential has been shrinking since mid-August, when domestic HRC held a record high $215 per ton price advantage over German imports. 

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.

By Brett Linton, brett@steelmarketupdate.com