Domestic, imported HR prices level again

SMU’s check of the market on Tuesday, Aug. 20, put domestic HR tags at $675 per short ton (st) on average, up $10/st from last week. (Note that stateside hot band, while up $40/st from a 20-month low, remains $170/st below a recent high of $845/st in early April.)

Domestic HR prices are now theoretically just 0.3% cheaper than imports. They were 2.3% cheaper last week and nearly 12% cheaper just last month.

In dollar-per-ton terms, US HR is now, on average, $2/st cheaper than offshore product (see Figure 1). That compares to $15/st cheaper on average last week. That’s a massive change from late last year, when US HR was often hundreds of dollars per ton more expensive than offshore material.

The charts below compare HR prices in the US, Germany, Italy, and Asia. The left-hand side highlights prices over the last two years. The right-hand side zooms in to show more recent trends.

Methodology

This is how SMU calculates the theoretical spread between domestic HR coil prices (FOB domestic mills) and foreign HR coil prices (delivered to US ports): We compare SMU’s US HR coil weekly index to the CRU HR coil weekly indices for Germany, Italy, and East and Southeast Asian ports. This is only a theoretical calculation. Import costs can vary greatly, influencing the true market spread.

We add $90/st to all foreign prices as a rough means of accounting for freight costs, handling, and trader margin. This gives us an approximate CIF US ports price to compare to the SMU domestic HR coil price. Buyers should use our $90/st 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, please get in touch with the author at david@steelmarketupdate.com.

Asian HRC (East and Southeast Asian ports)

As of Thursday, Aug. 22, the CRU Asian HRC price was $429/st, down $20/st vs. the week prior. Adding a 25% tariff and $90/st in estimated import costs, the delivered price of Asian HRC to the US is approximately $626/st. As noted above, the latest SMU HR price is $675/st on average.

The result: US-produced HRC is theoretically $49/st more expensive than steel imported from Asia. That’s up $35/st vs. last week as stateside prices inch up and Asian tags slump. But it’s still a far cry from late December, when US HR was $281/st more expensive than Asian product.

Italian HRC

Italian HR coil prices were flat at $601/st this week. After adding import costs, the delivered price of Italian HR coil is, in theory, $691/st.

That means domestic HR coil is theoretically $16/st cheaper than HR coil imported from Italy. That is down $10/st from last week. Just five months ago, US HR was $297/st more expensive than Italian hot band.

German HRC

CRU’s German HR price moved to $624/st, which is $16/st higher than last week. After adding import costs, the delivered price of German HR coil is, in theory, $714/st.

The result: Domestic HR is theoretically $39/st cheaper than coil imported from Germany, down from a $6/st discount last week. At points in 2023, in contrast, US HR was as much as $265/st more expensive than German hot band.

Notes: Freight is important when 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, Section 232 tariffs no longer apply 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 prices from other countries. We do not include any antidumping (AD) or countervailing duties (CVD) in this analysis.