Foreign vs. Domestic HRC Prices: Imports' Appeal Remains Strong

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. Spot checks show freight for Southeast 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-per-ton figure as a benchmark and adjust up or down based on 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 It has been replaced by a tariff rate quota (TRQ).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, May 18, the CRU Far East Asian HRC price declined $27 per ton from the previous week to $717 per net ton ($790 per metric ton), down $127 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 $986 per ton (the first sub-$1,000 price since early-February). The latest SMU HRC price average is $1,350 per ton, down $15 compared to one week prior and down $130 per ton from one month ago. Therefore, US-produced HRC is now theoretically $364 per ton more expensive than imported Far East Asian HRC. That differential peaked at $375 per ton two weeks ago and was $335 per ton one month prior. This is the tenth 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 $1,060 per net ton ($1,168 per metric ton), down $68 per ton from last week and down $204 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $1,150 per ton. Accordingly, domestic HRC is now theoretically $200 per ton more expensive than imported Italian HRC, up compared to $147 per ton one week prior and $126 per ton four weeks ago. This is the largest spread seen since early February, and the ninth 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 was between $4-$98 per ton more expensive than domestic steel. 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 $1,096 per net ton ($1,208 per metric ton), down $87 per ton from last week and down $247 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $1,186 per ton. Accordingly, domestic HRC is theoretically $164 per ton more expensive than imported German HRC, up from a spread of $92 the week prior and $47 one month ago. Recall that German prices were more expensive than domestic steel between late February and mid April. This is the highest spread seen since early February, and the fifth consecutive week foreign steel prices have held this price advantage. 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. 

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