Foreign vs Domestic HRC Price Update: Imports' Appeal Still Strong

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, Nov. 10, the CRU Far East Asian HRC price decreased $14 per ton to $771 per net ton ($850 per metric ton), down $23 from two weeks prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $1,054 per ton. The latest SMU hot rolled price average is $1,855 per ton, down $20 from one week ago, and down $30 from two weeks prior. Therefore, U.S.-produced HRC theoretically is now $801 per ton more expensive than imported Far East Asian HRC, down from $804 last week, and down from $832 one month ago. The $847 spread seen in early-September was the largest theoretical spread between Far East Asian and domestic HRC prices in SMU’s four-year history. Prior to 2021, the previous record high was $183 per ton in March 2018.

Italian HRC

CRU published Italian HRC prices at $958 per net ton ($1,056 per metric ton), down $8 from last week, and down $24 from two weeks ago. After adding tariffs and import costs, the delivered price of Italian HRC is approximately $1,287 per ton. Accordingly, domestic HRC is theoretically $568 per ton more expensive than imported Italian HRC, down from $577 the week prior, and down from $563 one month ago. Last week’s spread of $577 was the largest seen in our limited history. Prior to 2021, the previous record high was $143 per ton in July 2016. Recall that in late-May/early-June, Italian HRC briefly lost its price advantage over domestic steel for two weeks.

German HRC

The latest CRU German HRC price is $1,050 per net ton ($1,158 per metric ton), up $4 from last week, but down $4 from two weeks ago. After adding tariffs and import costs, the delivered price of German HRC is approximately $1,403 per ton. Accordingly, domestic HRC is theoretically $452 per ton more expensive than imported German HRC, down from $478 last week and down from $483 one month ago. The late-October spread of $504 was the largest seen in our limited history. Prior to 2021, the previous record high was $121 per ton in March 2018. Like Italian HRC, German HRC briefly lost its price advantage over domestic steel for two weeks in late-May/early-June.

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