Futures
Hot Rolled Futures: China Meltdown
Written by Andre Marshall
May 1, 2014
This article is part of a longer article first published on Thursday, May 1st and is written by Andre Marshall, CEO of Crunchrisk, LLC and our Managing Price Risk II instructor:
Steel
It was a fairly quiet week in futures with 400 lots or 8,000 ST trading most of yesterday on the July date. The nearby months of May/June are less well bid than the highs by about $7-10/ST. However, in the last few days July and Aug have increased by about $7/ST, so it looks like nearby hedging is moving out the curve a bit. The balance of the year continues to be offered either side of $635. Buyers are about $5/ST below offers in the current environment. The CRU came in $683/ST or $4/ST higher. We seem to have a plateau in futures which appears to be mirroring a similar plateau in spot, at least for now.
Iron Ore
A real meltdown in China. Can’t say it wasn’t expected at some point, but Iron Ore dropped $5/MT in a day, or 4.5%! Chinese trade houses liquidated length on the back of economic data, poor housing sales, and new rules around margins required for LOC’s for financing of inventory. This relates to the finance schemes to lower borrowing rates that I have been referring to. We were $105/MT on Wednesday close but, due to the Singapore holiday, Iron Ore did not trade on the index or futures today, so tomorrow could bring more fireworks. For now, the price suggests that the marginal cost of the Chinese producers is not relevant to the current supply fundamentals and high port stocks. Let’s call June $104/MT, July $103/MT, Aug $102.25/MT, Q4 $101.25/MT, and Cal ’15 $100.25/MT.
Scrap
CFR Turkey continues to be under pressure–down again a dollar today to $375/MT. Continued lack of Chinese long product demand and difficult exports are the culprit. Lack of east coast activity on our shores continues to weigh on the domestic market. Depending on the region, we are hearing sideways to down, mostly with East Coast under greatest pressure and Chicago/Mid West under least, with Mini’s having picked up order from the BOF supply disruptions. Looks like Midwest may still come in down $10/GT by the time we are done.
Andre Marshall
Read more from Andre MarshallLatest in Futures
HRC Futures: Here comes Trump bump 2.0?
No more excuses! The election is over. Donald Trump will be inaugurated on Monday January 20 with the Republican party in control of Congress. Now, it is time to get back to work!
HR Futures: Which way following election?
Since June, The US hot-rolled coil (HRC) futures market has been in a rare period of prolonged price stability, closely mirroring the subdued volatility seen in the physical market. Over the past five months, futures have been rangebound, with prices oscillating between a floor near $680 and a ceiling around $800. This tight range, highlighted in the chart, underscores a cautious market environment. The chart below shows the rolling 3rd month CME HRC Future.
HR futures: Support fails as market slows ahead of election
After a relatively stable and boring September, CME hot-rolled coil (HRC) futures have been on the move lower thus far in October. Since Sept. 30, the November and December futures have declined $63 and $65, respectively, with the curve’s contango steepening.
CRU: Open interest in December HR futures contract surges
CRU Principal Analyst Josh Spoores shares insight into the hot-rolled coil futures market.
HR futures: How many ways to stay the same?
While the English language is vast, there is not an endless number of ways to say, “no major changes have transpired.” And if anyone has been tasked with talking about steel price changes in physical and futures US domestic steel market over the last four months, they are probably stretching their ability to its limit.