Foreign vs. Domestic HRC Prices: Imports Losing Appeal

The following calculation is used by Steel Market Update to identify the theoretical spread between foreign HRC prices (delivered to US ports) and domestic HRC prices (FOB domestic mills). This is only a “theoretical” calculation because freight costs, trader margins, and other costs can fluctuate, ultimately influencing the true market spread. This compares the SMU US HRC weekly index to the CRU HRC weekly indices for Germany, Italy and Far East Asian ports.

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, costs for European products between $80-120 per ton, and costs for Turkish steel around $150 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.

If any of our readers have experience importing foreign steel and want to share your thoughts on these costs, we welcome any comments: Brett@SteelMarketUpdate.com.

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 It has been replaced by a tariff rate quota (TRQ).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, June 15, the CRU Far East Asian HRC price declined $18 to at $671 per net ton ($740 per metric ton), down $45 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 $929 per ton. The latest SMU HRC price average is $1,100 per ton, down $90 compared to one week prior and down $250 per ton from one month ago. Therefore, US-produced HRC is now theoretically $171 per ton more expensive than imported Far East Asian HRC. This differential has eased each of the last four weeks, having peaked at $375 per ton in early May. This is the 14th consecutive week foreign steel prices have held this price advantage. 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 $864 per net ton ($953 per metric ton), down $63 per ton from last week and down $195 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $954 per ton. Accordingly, domestic HRC is now theoretically $146 per ton more expensive than imported Italian HRC, down from $173 per ton one week prior and down from $200 per ton four weeks ago (which was a 13-week high). This is the 13th consecutive week foreign steel prices have held this price advantage. 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 $907 per net ton ($1,000 per metric ton), down $74 per ton from last week and down $189 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $997 per ton. Accordingly, domestic HRC is theoretically $103 per ton more expensive than imported German HRC, and has eased each of the last four weeks. This is down from a spread of $119 per ton the week prior and down from a 14-week high of $164 per ton four weeks ago. This is the ninth consecutive week foreign prices have held this competitive 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