Foreign vs. Domestic HRC Price Analysis: Foreign Advantage Continues

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, Feb. 3, the CRU Far East Asian HRC price was unchanged over last week to $590 per net ton ($650 per metric 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 $828 per ton. The latest SMU hot rolled price average is $1,150 per ton, up $10 over last week and up $20 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $323 per ton more expensive than imported Far East Asian HRC, up from $280 two weeks ago. Asian imports, which had been more expensive than domestic for over 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 $776 per net ton ($856 per metric ton), up $3 from last week and up $21 over two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,060 per ton. Accordingly, domestic HRC is theoretically $90 per ton more expensive than imported Italian HRC, down from $96 two weeks ago. 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 $782 per net ton ($862 per metric ton), up $2 from the previous week and up $17 from two weeks prior. Adding tariffs and import costs, that puts the German price at $1,068 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $83 per ton more expensive than imported German HRC, down from $84 two weeks ago. 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@SteelMarkeUpdate.com