Foreign vs. US HRC Prices: Domestic Holds the Edge

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. Buyers should use our $90 per ton figure as a benchmark, adjusting it as necessary based on their own shipping and handling costs. If you have experience importing foreign steel and want to share your thoughts on these costs, we welcome your insight and comments: Brett@SteelMarketUpdate.com.

Far East Asian HRC (East and Southeast Ports)

As of Wednesday, Nov. 2, the CRU Far East Asian HRC price declined $5 week-over-week to $485 per net ton ($535 per metric ton), down $50 per ton compared to 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 $697 per ton. The latest SMU hot-rolled average is $685 per ton, down $25 week-over-week and down $80 compared to one month ago.

Therefore, US-produced HRC is now $12 per ton cheaper than steel imported from Far East Asia. We saw the opposite situation in the two weeks prior to this, when US prices were theoretically $5-8 per ton more expensive than Asian imports. One month ago, Far East Asian prices held a discount of $6 per ton versus domestic steel. The differential peaked earlier this year at $375 per ton in May, when Far East Asian prices held a considerable advantage. The widest price advantage for Far East Asian prices was just over a year ago, at $847 per ton in September 2021.

Italian HRC

CRU published Italian HRC prices at $604 per net ton ($665 per metric ton) this week, down $22 per ton compared to last week, and down $71 per ton from one month ago. After adding import costs, the delivered price of Italian HRC is approximately $694 per ton.

Domestic HRC is now theoretically $9 per ton cheaper than imported Italian HRC. Prices from these regions have been within $10 per ton of each other for the past six weeks. Last week the spread was $6 per ton (with US prices holding the advantage), the week prior Italian HRC held the advantage by $1 per ton. One month ago, prices between these two regions were identical. The highest spread this year was $200 per ton in May. 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

CRU’s latest German HRC price decreased $20 per ton from last week to $613 per net ton ($675 per metric ton), down $68 per ton from one month ago. After adding import costs, the delivered price of German HRC is approximately $703 per ton.

Accordingly, domestic HRC is now theoretically $18 per ton cheaper than imported German HRC. Last week, domestic prices held a $14 per ton advantage, while two weeks ago prices between these two regions were identical. One month ago, domestic prices held a discount of $5 per ton compared to German HRC. Domestic HRC has had held the price advantage for all but three weeks since late July. German HRC held the price advantage for the three months prior to that, having 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.

Notes: 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, domestic steel will deliver faster than foreign steel ordered on the same day.

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.

By Brett Linton, Brett@SteelMarkeUpdate.com