Steelmakers in the United States
reportedly are charging customers less in the South and more in the Midwest
mainly due to three factors: differences in import penetration, end-market
demand and cost structure, according to market participants — a disparity
highlighted by Fastmarkets’ new index for the southern region
The new weekly South HRC index —
which launched on Wednesday January 4 — will complement Fastmarkets’ existing
daily Midwest HRC index and track these regional cost differences for the
benefit of buyers. The index was launched in response to market
participants regularly reporting these regional price disparities.
“There are times it’s a $20-30 per short ton [$1.00-$1.50 per
hundredweight] difference in base prices [between the two regions], and I’ve
seen it go more than that,” a southern distributor told Fastmarkets last fall.
The inaugural index calculation for South HRC was more than $2
per cwt lower than Midwest HRC.
Fastmarkets’ weekly steel hot-rolled coil index, fob mill US
South was calculated at $34.94 per cwt ($698.80 per ton) on January 4, 5.72%
lower than the daily steel hot-rolled coil index, fob mill US
Midwest of $37.06 per cwt on the same day and 2.76% lower than the
Midwest index average of $35.93 per cwt for December 29 through January 4.
Inputs for the South HRC index were received in a range of
$33.00-37.50 per cwt, including deals at the low end and an offer at the high
end.
1. Imports into the South arrive from
many different suppliers
Several of the nation’s largest ports are in the South,
including the Port of Houston — a major steel hub that attracts imports from a
range of nations — which may put more pressure on domestic mills compared to
the Midwest.
“The South is trading lower from what I can tell because there’s
more pressure [from imports] down here,” a second southern distributor said.
“Mexican mills are doing OK, there’s still some pressure from Europe,
downstream products can come from Brazil now — Houston is very much affected by
that, so mini-mills have to adjust [to compete with lower import prices] and
that keeps a lid on [domestic price levels] down here.”
The impact of easy access to competitive imports may factor more
dramatically into long-term regional price differences than recent numbers
because imports have not been able to compete with falling domestic prices in
recent months, a third southern distributor noted.
“Imports come into bigger play when domestic is tight and
domestic mills don’t want to sell to smaller guys who don’t have contracts, but
that hasn’t been the case over the last year,” he said.
Both the Gulf of Mexico and barge transport on the Mississippi
River also provide South mills with access to competitively priced raw
materials, another source noted.
Hot band imports to the US increased by 3.13% in November 2022
compared with October, but were still down by 48.38% compared with November
2021 volumes, according to government data.
Hot-rolled coil prices in the US are typically the highest in
the world, making it an attractive market for importers. Fastmarkets’ daily
steel hot-rolled coil index, fob mill US was $36.57 per cwt on Monday January 9
($731.40 per short ton). That’s in comparison to steel hot-rolled coil index
domestic, exw Northern Europe at €707.50 per tonne ($689.53 per ton) on Monday
and steel hot-rolled coil index export, fob main port China at $620 per tonne
($562.46 per ton) on the same day.
The US imported 9.25 million tonnes of hot-rolled, cold-rolled
and coated coil products in 2021, of which 1.22 million tonnes came through
Houston, according to data from the US International Trade Commission’s
Interactive Trade Dataweb. The top port of entry in 2021 was Detroit with 2.21
million tonnes of those products. However, 99.29% of those tonnes into Detroit
were shipped from Canada, while flat steel products entered Houston from
diverse origins.