Futures

Hot Rolled Coil Futures Trade Sideways...

Written by Bradley Clark

May 8, 2014

The hot rolled coil (HRC) futures market has been trading sideways over the past couple of weeks, taking cues from the physical market that looks to have slowed its ascent.  Trading volumes have been fairly average, with traders and hedgers seemingly more comfortable on the sidelines until a new catalyst sparks the market to break one way or the other.   The nearby periods remain strong, with May and June trading between $670-680. The back end is trading in strong backwardation as prices are moving in a substantial discount to spot and nearby months, with Q3 and Q4 trading around $630-635.  This market structure suggests many view the recent surge in steel prices to peak in June before retracing throughout the summer and fall.  Whether this will materialize is still very uncertain. It seems that another price hike is around the corner and pent up demand is still beginning to take hold as spring becomes summer.

Volumes have been strong the past week with over 10,000 tons trading.  

If you are reading this from your inbox, the space below contains our interactive graphic of the HRC futures forward curve which also includes what the forward curve was 30 days ago. You can read the newsletter online by logging into the website and then clicking on the “read full text” link at the top of the emailed newsletter or, you can log into the site and then click on the Newsletter tab and Newsletter Archives. The most recent issue will be at the top of the list and you can read the newsletter in its entirety (top to bottom) from there including all interactive graphics. If you need help logging into the website please contact our office: 800-432-3475 or, info@SteelMarketUpdate.com.  

{amchart id=”73″ HRC Futures Forward Curve}
 
U.S. Midwest #1 Busheling Ferrous Scrap (AMM) Market Softens
 
In contrast to the finished steel market, prime scrap is looking softer this month. Busheling in the Midwest is trading down $10 / ton.  In seems that enough supply is around to cover existing demand even amongst a stronger finished market.  If exports strengthen and steel demand remains strong, this dip in May should be quickly corrected in June. The futures market has remained very quiet, however a July contract traded this week at $380 / ton for 680 tons on the CME Globex screen.  This is the first trade completed in many weeks, so signs of life in this futures contract may yet be visible.

Another one of those pesky interactive graphics is located in the space below…

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

A note to our readers: Steel Market Update and Andre Marshall of CrunchRisk LLC will conduct a special hedging workshop called: Managing Price Risk II: Strategies & Execution  in Chicago on June 24 & 25th more details are available on our website.

Bradley Clark

Read more from Bradley Clark

Latest in Futures

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.