Foreign vs Domestic Prices: Foreign Advantage Growing

In consideration of freight costs, handling, trader margin, etc., we add $90 per ton to all foreign prices to provide an approximate “CIF US ports price” that can be compared against the SMU US HRC price. Recent spot checks show freight on SE Asian imports into Houston costing between $100-110 per ton and costs for European products between $85-90 per ton. Buyers should use our $90 figure as a benchmark and adjust up or down to their own shipping and handling costs as necessary.

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 It has been replaced by a tariff rate quota (TRQ).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 a 25% tariff. SMU still includes the 25% S232 tariff on foreign prices from other countries. 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, April 27, the CRU Far East Asian HRC price declined $37 per ton from the previous week to $807 per net ton ($890 per metric ton), down $27 per ton from one month prior. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Far East Asian HRC to the US is $1,099 per ton. The latest SMU HRC price average is $1,450 per ton, down $30 compared to one week prior, but up $15 per ton from one month ago. Therefore, US-produced HRC is now theoretically $351 per ton more expensive than imported Far East Asian HRC. That differential was $335 per ton last week and $305 per ton two weeks prior. This is the seventh consecutive week foreign steel prices have held this price advantage. We briefly saw the opposite in February and March when domestic HRC was $28-72 per ton cheaper than Far East Asian prices. The largest price spread between these regions was $847 per ton in September 2021, when Far East Asian prices held a considerable advantage.

Italian HRC

CRU published Italian HRC prices at $1,219 per net ton ($1,343 per metric ton), down $45 per ton from last week and down $121 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $1,309 per ton. Accordingly, domestic HRC is now theoretically $141 per ton more expensive than imported Italian HRC, compared to $126 per ton one week prior and $37 per ton two weeks ago. This is the sixth consecutive week foreign steel prices have held this price advantage. We briefly saw the opposite in the first half of March, when imported Italian HRC offered a theoretical savings of $4-98 per ton. Prior to removal of the 25% Section 232 tariff, the November 2021 spread of $577 per ton was the largest seen in SMU’s data history.

German HRC

The latest CRU German HRC price is $1,300 per net ton ($1,433 per metric ton), down $43 per ton from last week and down $114 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $1,390 per ton. Accordingly, domestic HRC is theoretically $60 per ton more expensive than imported German HRC, up from a spread of $47 last week. Prior to last week, we saw the opposite over the previous eight weeks, when domestic prices held the competitive advantage. Two weeks ago German prices were $27 per ton more expensive than domestic steel, and one month ago they were $70 per ton more expensive. Prior to removal of the 25% tariff, the October 2021 spread of $504 per ton was the largest seen in SMU’s data history.

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 importing costs (and tariffs in some cases) for a like-for-like comparison against the US price. The second graphic shows the same data but focuses on prices over the last 16 months.

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