International Steel Prices

Foreign HRC Losing Competitive Edge Over Domestic Prices

July 21, 2022

The appeal to import cheaper foreign hot-rolled coil (HRC) instead of domestic steel continues to lessen, according to Steel Market Update’s latest foreign versus domestic price comparison. For the past two months, domestic steel prices have generally declined at a faster rate than foreign prices, meaning the potential discount on imported products has been shrinking. After taking freight costs, trader margins and tariffs into consideration, select foreign prices now hold a 2–12% discount compared to domestic prices (down from 12–26% in late May).

The following calculation is used by SMU 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 It has been replaced by a tariff rate quota (TRQ).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, July 20, the CRU Far East Asian HRC price declined $46 to $544 per net ton ($600 per metric ton), down $91 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 $770 per ton. The latest SMU HRC price average is $875 per ton, down $35 compared to one week prior and down $165 per ton from one month ago. Therefore, US-produced HRC is now theoretically $105 per ton more expensive than imported Far East Asian HRC, up from a spread of $83 per ton last week, but down from $156 per ton one month ago. This differential has gradually eased since peaking at $375 per ton in early May. This is the 19th 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 $704 per net ton ($776 per metric ton), down $5 per ton from last week and down $128 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $794 per ton. Accordingly, domestic HRC is now theoretically $81 per ton more expensive than imported Italian HRC, down from $111 per ton one week prior and down from $118 per ton four weeks ago. The highest spread this year was $200 per ton in mid-May. This is the 18th 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 in SMU’s data history.

German HRC

The latest CRU German HRC price is $771 per net ton ($850 per metric ton), up $1 per ton from last week, but down $82 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $861 per ton. Accordingly, domestic HRC is theoretically $14 per ton more expensive than imported German HRC. This is down from a spread of $50 per ton one week prior, down from $97 per ton four weeks ago, and down from the 2022 high of $164 in mid-May. This is the 14th 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 CIF 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

Brett Linton

Brett Linton is a senior analyst for Steel Market Update, where he began his career. Linton has been in the steel industry since 2010. He has held roles as a category manager and strategic insights director at Reibus before returning to SMU in 2024. He is a graduate of The University of North Georgia with a degree in Finance and Accounting. Brett can be reached at brett@steelmarketupdate.com or 724-314-0179.