Foreign vs. Domestic Prices: HRC Imports More Attractive Again

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, June 30, the CRU Far East Asian HRC price declined $27 over the previous week to $844 per net ton ($930 per metric ton), down $54 per ton from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,145 per ton. The latest SMU hot rolled price average is $1,770 per ton, up $10 over last week and up $50 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $625 per ton more expensive than imported Far East Asian HRC, up from $581 last week, and up from $507 two weeks ago. This spread has reversed its course over the last few weeks, as the potential discount held by Far East Asian HRC imports shrank from mid-February through mid-April. This is now the largest theoretical spread between Far East Asian and domestic HRC prices in our four-year history (we have seen a new record spread each of the last six weeks). Prior to 2021, the previous record high was $183 in March 2018.

Italian HRC

CRU published Italian HRC prices at $1,243 per net ton ($1,370 per metric ton), up $12 from last week, and up $2 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,644 per ton. Accordingly, domestic HRC is theoretically $126 per ton more expensive than imported Italian HRC, down from $132 the week prior, but up from $80 two weeks ago. In late-May/early-June, Italian HRC briefly lost its price advantage over domestic steel for two weeks. Recall that the largest price spread in our history was $210 seen in mid-March 2021. Prior to 2021, the previous record high was $143 in July 2016.

German HRC

The latest CRU German HRC price is $1,282 per net ton ($1,413 per metric ton), up $20 from last week, and up $21 from two weeks ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,692 per ton. Accordingly, domestic HRC is theoretically $78 per ton more expensive than imported German HRC, down from $93 last week, but up from $54 two weeks ago. Like Italian HRC, German HRC briefly lost its price advantage over domestic steel for two weeks in late-May/early-June. Recall that the largest price spread in our history was $172 seen in mid-March 2021. Prior to 2021, the previous record high was $121 in March 2018.

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