In the US and abroad, HR prices are trending downward together

U.S. hot rolled (HR) coil prices fell again last week, reflecting movement in offshore markets. This left domestic prices slightly higher than imports on a land basis.

Prices in the US slowly moved above imports after reaching parity with import prices in late August. Prices have been mostly stable over the past seven weeks, resulting in only minor shifts in the US price premium.

The SMU market check on Tuesday, October 15, showed average domestic HR tags at $690 per short ton (st), down $5 per st from the week before . While the U.S. hotband rebounded from 20-month lows in July, prices have remained little changed since then, with average prices rising just $55 an hour over the past nearly three months.

Domestic personnel are now theoretically 4.7% more expensive than imported material. That’s almost unchanged and just a touch higher than last week’s figure of 4.6%. Although gains were negligible at times, prices are still higher than at the end of July, when US-available products were about 12% cheaper than imported HR.

On a dollar per ton basis, US HR is currently an average of $32 per hour more expensive than offshore products (see). Figure 1). That’s flat compared to last week. Prices are still $104/hour higher than late July, when U.S. tags were about $72/hour cheaper than offshore material.

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

methodology

Here’s how SMU calculates the theoretical spread between domestic HR coil prices (FOB domestic factories) and foreign HR coil prices (delivery to US ports): We compare SMU’s weekly US HR valuation to the weekly HR indices from CRU for Germany, Italy and the East and Southeast Asian ports. This is just a theoretical calculation. Import costs can vary greatly and influence the actual market distribution.

As a rough calculation of freight, handling and dealer margin, we add a surcharge of $90 per person to all international prices. This gives us an approximate CIF price for US ports to compare with the SMU domestic price for HR coils. Buyers should consider our value of $90/pc. Use as a guide and adjust it up or down depending on your own shipping and handling costs. If you import steel and would like to share your thoughts on these costs, please contact the author at [email protected].

Asian HRC (East and Southeast Asian ports)

On Thursday, October 17, the CRU Asian HRC price was $480/st, a decrease of $4/st compared to the previous week. Considering a 25% tariff and an estimated import cost of $90/pc. Added to this, the price for delivery of Asian HRC to the USA is approximately $690/pc. As mentioned above, the current SMU US HR price averages $690/pc.

The result: HR made in the USA is theoretically equivalent to steel imported from Asia. Despite the sideways week-over-week (w/w) margin movement, it is a far cry from late December, when U.S. labor was $281 per hour more expensive than Asian products.

Italian HRC

According to CRU, staff prices in Italy are up $3/hr this week. to 547 USD/pc. sunk. After adding import costs, the delivery price for Italian HR is theoretically $637/pc.

That means domestic HR coils are theoretically still $53 per hour more expensive than imports from Italy. This spread remains unchanged as both markets fell slightly. Remember, just five months ago, HR in the US was $297 per hour more expensive than HR in Italy.

German HRC

The German HR price of CRU fell by $7/pc this week. to 556 USD/pc. After adding import costs, the delivery price for German HR coils is theoretically $646 per piece.

The result: Domestic staff is theoretically $44 more expensive per person than products imported from Germany, an increase of $2 per person by weight. About a month ago, Hot Band from the USA was available at a discount of $18 per person. In contrast, in 2023, US HR was up to $265 per hour more expensive than imported German hot band.

Notes: Freight is important when deciding whether to import foreign steel or purchase it from a domestic steel mill. Domestic prices are referred to as FOB of the producing plant. Foreign rates are CIF, the port (Houston, NOLA, Savannah, Los Angeles, Camden, etc.). Domestic transportation from a domestic plant or port can significantly affect the competitiveness of domestic and foreign steel. It is also important to consider lead times. In most markets, domestic steel is delivered faster than foreign steel. Effective January 1, 2022, Section 232 tariffs will no longer apply to most imports from the European Union. It was replaced by a tariff quota (TRQ). Therefore, the German and Italian price comparisons in this analysis no longer include a 25 percent tariff. SMU continues to apply the 25% Section 232 tariff on prices from other countries. We do not consider anti-dumping duties (AD) or countervailing duties (CVD) in this analysis.