Foreign vs Domestic Hot-Rolled Coil Price Analysis

Note that 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 as freight costs, trader margins, and other costs can fluctuate, ultimately influencing the true market spread. The below analysis 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, and trader margin, we add $90 per ton to all foreign prices to provide an approximate “CIF US ports price” that can be compared against the SMU domestic HRC price. Spot checks show freight for Southeast Asian imports into Houston costing $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 your insight and 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 It has been replaced by a tariff rate quota (TRQ).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, Sept. 8, the CRU Far East Asian HRC price remained unchanged week-over-week at $535 per net ton ($590 per metric ton), down $18 versus 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 $759 per ton. The latest SMU hot rolled average is $780 per ton, down $5 week-over-week and down $40 per ton from one month ago. Therefore, US-produced HRC is now $21 per ton more expensive than steel imported from Far East Asia, down from a spread of $26 per ton last week. Recall that two weeks ago, we saw identical prices between these regions, an occurrence not seen in steel since early March 2022. One month ago we saw a spread of $38 per ton (meaning Far East Asian imports were cheaper than domestic steel). This differential has eased since peaking at $375 per ton in May. 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 $686 per net ton ($756 per metric ton), up $14 per ton from last week, but down $13 per ton compared to one month ago. After adding import costs, the delivered price of Italian HRC is approximately $776 per ton. Accordingly, domestic HRC is now theoretically just $4 per ton more expensive than imported Italian HRC. That’s the lowest the spread has been since March. This is down from a spread of $23 per ton one week earlier and down from $31 per ton four weeks ago. The highest spread this year was $200 per ton in May. Italian hot-rolled has held this price advantage for more than five months. Before the 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 increased $9 per ton from last week to $693 per net ton ($764 per metric ton), down $52 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $783 per ton. Accordingly, domestic HRC is now theoretically $3 per ton cheaper than imported German HRC. The week prior we saw the opposite situation when domestic prices were $11 per ton more expensive than imported German steel. Other than last week, domestic prices have had the cost advantage since late July. One month ago, US prices were $16 per ton cheaper than German HRC. Prior to late July, German prices held the price advantage for 14 consecutive weeks, and the spread reached a 2022 high of $164 per ton in May. Prior to the removal of the 25% tariff, the October 2021 spread of $504 per ton was the widest 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