Hot Rolled Futures: Start the Easing of the Easing

How did commodities fare in all this?

Well Gold tanked 11.5% on the news yesterday only to be completely outdone by the resounding reaction today of another 29 point drop to 1190.70. Yes, as in below 1200 again! Today was a 23% drop alone. Not looking good for Gold in short term. Crude put in little reaction yesterday, but rallied as much as $1.64/bbl today only to close poorly at $98.68/bbl in the lower end of its range. We are at a pretty important resistance level in crude established from the October 16th high. We failed to breach it on a close today. We will need to close above $99.15/bb in next day or so in order to avoid a retracement here. Longer term I would think that crude will be under pressure with supply fundamentals growing daily. Copper meanwhile has broken support and lost 2cts/lb since the fed announcement. Copper should find support at $3.275/lb, and, as a commodity, looks fairly strong with tight supplies continuing to hamper existing demand needs. This won’t likely improve until the latter half of the year. Spreads remain backwardated here all the way out the curve.

Steel:

We had a respectable week in HR futures with 805 lots traded in the week or 16,100 ST. Q1 ’14 traded in a range of $653-657/ST, which is up a couple dollars on average from previous levels. The curve remains backwardated here in HR, and the back three quarters traded in a range of $630-636/ST, which is off a tad from previous levels. Buyers and Sellers continue to connect here in the HR futures. The CRU meanwhile printed another sideways print, this time $669/ST or down $1/St. It appears as if most buyers are set for the next month to two on purchases, and further for some if bought import, and so on they are sidelines for now, and price not moving as a result. The December import licenses in the first week reflected greater imports in December than in either October or November. Also MSCI reported higher inventories on hand at 2.1 months for HR up from 1.9 in October. The ship rate was lower than expected causing the move. Next month, should reflect similar trend for December basis typically slow time of year.

Below is the interactive forward curve chart which is part of the new SMU website. You will need to be logged into the website to be able to see the graphics provided in this article (2).

{amchart id=”73″ HRC Futures Forward Curve}

Iron Ore:

Well Iron Ore is moving, down that is. We are last $132.70/MT. This is down $7/MT from when I reported on Iron Ore two weeks back. Further the market remains backwardated. The Chinese New year come about 10 days earlier this year at end January and some feel that the traders and mills have already bought for their needs through the Holiday period and that demand will remain tepid in the interim. This and the US tapering could be the two likely drivers of the increased pessimism. China’s equity markets were actually down quite a bit their opening this morning on the Fed news. Let’s call January either side of $130.63/MT, Q1 ’14 either side of $129/MT,  Q2 ’14 either side of 123/MT, Q3 ’14 either side of $119/MT and Cal ’14 either side of $122/MT.

Scrap:

Tight Shred was all the talk for December’s scrap activity here. Meanwhile prime had no such issue as manufacturing activity kept flows healthy. So Bush got pulled up up by the Shred price increases that were up between $25-35/GT, but BUS in the end was only up $6/GT in the MidWest. It made sense that the spread would narrow between the two types and the better supply of Bush going into the next month may well keep the lid on prices going forward as prime serves as a fine substitute should shred prices not cooperate for the mills in the New Year. Interest on BUS futures continues with market $420 bid for Q1 and $430 offered for the back three Quarters.

The CFR Turkey Index has held steady, even climbed a tad to $397/MT. The demand for Turkish market has improved a bit, and there are further hopes that Iran’s pent up demand will provide even further sales. Prices here keep the Turks off our shores for the time being.

{amchart id=”74″ BUS Futures Forward Curve}