Foreign vs. Domestic: U.S. HR Prices Are Down, But Imports Are Still Lower

Note that effective Jan. 1, 2022, the traditional Section 232 tariff no longer applies to most imports from the European Union. It has been replaced by a tariff rate quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include the 25% tariff, thus comparisons to prior prices may be skewed. SMU still includes the 25% S232 tariff on foreign prices from other countries. We also add $90 per ton to all 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. Buyers should use that $90 rate as the benchmark from which to adjust their own shipping and handling costs up or down. 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. 5, the CRU Far East Asian HRC price remained unchanged at $689 per net ton ($760 per metric ton), down $45 from one month prior. Adding tariffs and import costs, the delivered price of Far East Asian HRC to the U.S. is $952 per ton. The latest SMU hot rolled price average is $1,535 per ton, down $65 from one week ago, and down $195 from one month prior. Therefore, U.S.-produced HRC theoretically is now $583 per ton more expensive than imported Far East Asian HRC, down from $648 last week, and down from $721 one month ago. Recall that the early-September spread of $847 per ton was the largest theoretical spread between Far East Asian and domestic HRC prices in SMU’s four-year data history. Prior to 2021, the previous record high was $183 per ton in March 2018.

Italian HRC

CRU published Italian HRC prices at $874 per net ton ($963 per metric ton), down $14 from last week, and down $55 from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $964 per ton. Accordingly, domestic HRC is theoretically $571 per ton more expensive than imported Italian HRC. Prior to removal of the 25% tariff, the early-November spread of $577 per ton was the largest seen in SMU’s limited data history. Prior to 2021, the previous record high was $143 per ton in July 2016.

German HRC

The latest CRU German HRC price is $962 per net ton ($1,060 per metric ton), down $15 from last week, and down $22 from one month ago. After adding import costs, the delivered price of German HRC is approximately $1,052 per ton. Accordingly, domestic HRC is theoretically $483 per ton more expensive than imported German HRC. Prior to removal of the 25% tariff, the mid-October spread of $504 per ton was the largest seen in SMU’s limited data history. Prior to 2021, the previous record high was $121 per ton 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