Hot-rolled band prices: Massive modulation
The world hot-rolled band export price (FOB the port of export), the Chinese domestic HRB price (ex-works excluding the 17% VAT) and the USA HRB price (FOB the steel mill) often move in the same direction – although, there are major exceptions.
Looking back to 2001 through 2003, the Chinese and USA home-market hot-rolled band prices were at roughly the same level. During this time, there was a continued sizable shortfall of hot-rolled band production in China due to sharply rising demand. Since then, despite surging demand, the Chinese mills’ massive investment programs have permitted them to satisfy rising Chinse HRB demand. Currently, about 70 wide hot-strip mills are vying for the roughly 210 million tonne per year HRB market in the country. (Note: Chinese steel production in 2003 at 222 million tonnes compares to the current annualized rate of more than 900 million tonnes – for a compound annual growth rate of 9.85% per year.)
Let’s examine the HRB price on the world market, in China and in the United States at some of the highs and lows in the past 15 years:
- At the near-lows in May 2003, the export price per tonne of $280 compared to $298 in the USA and $283 in China.
- At the shortage highs in September 2004, the export price per tonne of $640 compared to $824 in the USA and $472 in China.
- At the lows in December 2005, the export price per tonne of $400 compared to $625 in the USA and $291 per tonne in China.
- At the highs in July 2008, the export price per tonne at $1,113 compared to $1,218 in the USA and $721 per tonne in China.
- At the near-lows in May 2009, the export price per tonne at $396 compared to $395 in the USA and $420 per tonne in China.
- As of early June 2018, the export price per tonne at $590 – down about $40 per tonne since March 2018 – compares to $978 per tonne in the USA and $568 per tonne in China.
Given the June 2018 prices and our monthly World Cost Curve estimates for May 2018, many steel mills are enjoying a “Golden Profit Age.” As of May 2018 for the median mill, the HRB operating cost was $478 per tonne in China, $517 per tonne in the USA and $491 per tonne for all non-Chinese mills. The marginal cost for these mills was $424 per tonne, $457 per tonne and $429 per tonne, respectively.
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