Usually, there’s a widening of “spreads” in the global steel business during steel shortage conditions. These widened spreads, in fact, contain the price/cost relationships that have created the current steel mills’ “Golden Profit Age.”
In our previous Strategic Insight reports– titled ”The Game of Spreads: Part I and Part II” – we examined the price spreads since 2010 for: 1) the Chinese home-market steel price versus the iron ore + coking coal cost; 2) Turkey rebar export price versus Turkey HMS 1&2 80/20 import scrap price; 3) the USA HRB Price versus the Shredded steel Scrap Price for PART I; 4) USA hot-rolled band price versus Chinese steel mill ex-works hot-rolled band price; 5) the HRB export price versus the iron ore and coking coal cost per tonne and 6) the China hot-rolled band price versus the TSI Iron Ore price delivered to China for part II. In this report, we examine three more relationships:
Here are the following spreads:
Spread 1: USA HRB versus Western Europe HRB spot price. The price of USA hot rolled band is currently about $2,124 per tonne, with the Western Europe HRB spot price at about $1,190 per tonne – or, an amazing $934 per tonne spread. The typical spread is generally between $100 to $200 per tonne.
Spread 2: Brazilian Pig Iron versus USA Prime Industrial Scrap. Since early 2010, the spread has often been about $50 to $100 per tonne average. It has since spiked to about $200+ per tonne in recent months. The current price of prime scrap is about $581 per tonne compared to Brazilian pig iron price of $495 for a spread of $86 per tonne.
Spread 3: The U.S. prime industrial scrap, and the price of shredded steel scrap delivered to the steel mill. Over the years, the typical spread has been about $40 to $60 per ton. It has surged to about $160 per ton. Prime Industrial scrap is currently about $590 per ton versus Shredded scrap at about $468 per ton for a spread of $122 per gross ton.
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