Foreign vs. Domestic Prices: Cheaper Imports Lure Buyers

SMU includes a 25% 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, March 17, the CRU Far East Asian HRC price increased $14 over the previous week to $685 per net ton ($755 per metric ton), up $23 per ton over two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $946 per ton. The latest SMU hot rolled price average is $1,300 per ton, up $30 over last week and up $60 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $354 per ton more expensive than imported Far East Asian HRC, up from $341 last week and up from $322 two weeks ago. 

Italian HRC

CRU published Italian HRC prices at $800 per net ton ($882 per metric ton), up $22 from last week, and up $24 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,090 per ton. Accordingly, domestic HRC is theoretically $210 per ton more expensive than imported Italian HRC, up from $207 last week and up from $180 two weeks ago. 

German HRC

The latest CRU German HRC price is $849 per net ton ($935 per metric ton), up $42 from the previous week and up $51 from two weeks prior. Adding tariffs and import costs, that puts the German price at $1,151 per ton delivered to the U.S. Therefore, domestically sourced HRC is theoretically $149 per ton more expensive than imported German HRC, down from $172 last week and down from $154 two weeks ago. 

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