US HRC Now a Better Bargain Than Imports

Since the beginning of Q1, US hot band had been significantly more expensive than imports, peaking in mid-April, and ballooning to a 23% premium on average. Imports are now more expensive, given that US tags have fallen by $180 per ton ($9 per cwt) just since mid-July, while offshore product is down on average just $18 per ton over the same period.

HRC tags stateside, at an average of $710 per net ton this week, declined by $15 from the previous week, slipping to their lowest level since the first week of January. Domestic prices are now down $450 per ton since peaking this year at $1,160 per ton back in April.

Overseas prices have also been weakening since April, but declines have been less pronounced. That has caused the spread between import and domestic pricing to reverse.

Domestic hot band is now 3.7% cheaper than foreign material. It was 15% more expensive just about six 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 Asia 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, Sept. 7, the CRU Asian HRC price was $517 per ton, unchanged from the previous week. Adding a 25% tariff and $90 per ton in estimated import costs, the delivered price of Asian HRC to the US is approximately $736 per ton. The latest SMU hot rolled average for domestic material is $710 per ton.

Now $26 per ton cheaper, US-produced HRC has theoretically lost its parity with steel imported from Asia.

Italian Hot-Rolled Coil

Italian HRC prices moved down marginally week over week (WoW,) declining by just $2 per ton to $642 per ton this week. After adding import costs, the delivered price of Italian HRC is approximately $732 per ton.

Domestic HRC is now theoretically $22 per ton cheaper than imported Italian HRC. That is a far cry from late March, when US tags were $260 per ton more expensive than those of imported Italian hot band.

German Hot-Rolled Coil

CRU’s latest price for German HRC declined last week, down $20 per ton WoW to $651 per ton. After adding import costs, the delivered price of German HRC is roughly $741 per ton.

Domestic HRC is now theoretically $31 per ton cheaper than imported German HRC. That’s up $5 per ton WoW, but still a $264-per-ton change vs. late March when German hot band was 20% cheaper than US product.

Figure 4 compares all four price indices. The chart on the right zooms in to highlight the difference in pricing from the second quarter of this year to the present.

Notes: Freight is important 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.