US Sheet Prices Remain Higher Than Offshore Hot Band

US HRC was less expensive than foreign hot band for 16 consecutive weeks. But that trend ended halfway through the first quarter as domestic HRC prices surged after repeated mill price hikes. The gains outpaced the rise seen for tags abroad. And while prices have been declining more aggressively stateside, prices abroad have begun to slip as well.

Domestic hot band is now roughly 21.2% more expensive than foreign material. That premium is marginally higher than last week when domestic HRC was ~21% more costly than imported product.

US prices had been cheaper than foreign prices for the three regions we follow (Asia, Italy, and Germany) since the beginning of November after adding freight costs, trader margins, and applicable tariffs. That changed with US HRC prices surging $400 per ton since the beginning of February. But US prices have lost momentum and are now down three weeks straight.

Domestic HRC cost on average $18 per ton less than imported hot band as recently as Feb. 15. That has flipped, and US prices are now $234 per ton more expensive than offshore product. That’s down from a recent high of $262 per ton just two weeks ago.

SMU uses the following calculation to identify the theoretical spread between foreign HRC prices (delivered to US ports) and domestic HRC prices (FOB domestic mills): Our analysis compares the SMU US HRC weekly index to the CRU HRC weekly indices for Germany, Italy, and east and southeast Asian ports. This is only a theoretical calculation because costs to import can vary greatly, influencing the true market spread.

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 to compare to the SMU domestic HRC price. Buyers should use our $90-per-ton figure as a benchmark and adjust up or down based on their own shipping and handling costs. If you import steel and want to share your thoughts on these costs, we welcome your insight at david@steelmarketupdate.com.

Asian Hot-Rolled Coil (East and Southeast Asian Ports)

As of Thursday, May 4, the CRU Asian HRC price decreased by $5 per ton from a week ago to $562 per net ton. This was down $32 per ton from levels one month prior. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Asian HRC to the US is $793 per ton. The latest SMU hot-rolled average is $1,105 per ton, down $15 per ton from our previous price update last week, and also down $50 per ton compared to our price one month ago.

US-produced HRC is now theoretically $312 per ton more expensive than steel imported from Asia. Though down roughly $9 per ton week on week (WoW), this is a reversal from mid-February when domestic HRC had a $13-per-ton advantage over HRC from Asian markets.

Just about three months ago, Asian HRC was $76 per ton more costly than US HRC. That was among some of the widest price gaps Asian HRC had over domestic product in recent years.

Italian Hot-Rolled Coil

Italian HRC prices decreased WoW by $22 per net ton to $819 per ton this week, and down $21 per ton month on month (MoM). After adding import costs, the delivered price of Italian HRC is approximately $909 per ton.

Domestic HRC is now theoretically $196 per ton more expensive than imported Italian HRC. That spread is up $7 per ton WoW and still represents a nearly $208-per-ton reversal compared to just 10 weeks ago when US HRC was $12 per ton cheaper than Italian product. As recently as Jan. 25, US HRC was in theory $52 per ton cheaper than imported Italian hot band.

German Hot-Rolled Coil

CRU’s latest German HRC price slipped by $24 per ton WoW to $820 per net ton, down $27 per ton MoM. After adding import costs, the delivered price of German HRC is roughly $910 per ton.

Domestic HRC is now theoretically $195 per ton more expensive than imported German HRC. That’s up $9 per ton WoW but still a swing of $224 per ton given that German hot band was $29 per ton more costly than domestic HRC in mid-February.

US HRC has held a price advantage over German product for all but three weeks since late July.

Figure 4 compares all four price indices and highlights the effective date of the tariffs. The chart on the left shows historical variation from Jan. 1, 2021, through present. The chart on the right zooms in to highlight the recent decoupling of US and offshore HRC prices.

Notes: Freight is an important consideration in deciding whether to import foreign steel or buy from a domestic mill. 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. It’s also important to factor in lead times. In most markets, domestic steel will deliver more quickly than foreign steel.

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% Section 232 tariff on foreign prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.

By David Schollaert, david@steelmarketupdate.com