US steel premium erodes, imports may follow

As US hot rolled coil (HRC) steel prices have fallen by more than 42pc from their peak in 2020, the US premium to global prices has tightened and imports may start to dry up.

The narrowing spread may lead US steel imports to follow past price trends and fall. The amount of import inquiries have dropped in recent weeks as US prices catch up to global levels and fewer foreign mills are interested in selling to the US, market sources said.

A potential drop in imports would come after volumes hit multi-year highs in 2021, when 29.6mn metric tonnes (32.63mn st) of steel products were imported into the US, the highest level since 2018. In that year then-president Donald Trump imposed the 25pc Section 232 steel tariffs, leading to higher prices in the US steel market.

Prices fell the following year and imports followed, declining by 17pc in 2019 to 25.33mn t, and then declined again to 20.03mn t during pandemic-stricken 2020, when the Argus US HRC Midwest assessment hit a low of $450/st ($496/t) in August.

In September 2021 after more than a year of increases the US HRC price peaked at $1,970/st. Price spreads with HRC from China, Turkey and Vietnam were more than $1,000/st, and over $800/st with northwest Europe.

Now US domestic prices have plummeted to $1,142.50/st ex-works on 8 February, with overbought service center inventories and aggressive import pricing dealing a one-two punch to the US market.

At the same time the spread with pricing from China, Turkey and Vietnam has declined by more than half. The spread between US HRC and northwestern European HRC is now just $185/st, and on 1 January the 25pc Section 232 tariff on EU steel was lifted in favor of a nontariffed quota system. The 25pc tariff is still applicable to imports from China, Turkey and Vietnam.

With US prices dropping precipitously — including triple digit price declines for two consecutive weeks ending on 8 February — US buyers have pulled back from all import offers, fearing bringing in foreign steel that could be above domestic prices when it arrives. European sellers are unlikely to send steel to the US at these levels, though recent declines in regional demand may push some to attempt to export.

The spread between US HRC and the HRC ddp price into Houston is now just over $220/st compared to $460/st in September.

US and global HRC prices $/st