Hot Rolled Futures: Calm Before the Storm?

Copper also broke the resistance I referred to two weeks back at $3.10/lb zone, rallying up to the $3.17/lb. resistance zone only to settle back to $3.145/lb. Normally when breaking resistance we would expect to see a number of days if not a week or more of short-cover buying, however, many shorts had already exited the market on other concerns, Russia/Ukraine, poor housing data, take your pick. So we have had a rally but it has not been all that impressive and further it appears to be a rally that is building some speculative longs as well, which is not bullish. That said it appears that speculative “risk-on” appetite has returned somewhat, which is interesting. We have seen this in all commodities. In Crude, we have put in a lower high at this point from the April $104/bbl ish high, having peaked this time yesterday at $102.65/bbl, but support from May 5th low is still intact so it’s not set in stone yet. The market last on June future is $101.5/bbl and can come off another $1/bbl to test recent support. If broken this lower high probably stands and we head lower to test the $99.00/bbl recent lows. Meanwhile Gold is in consolidation mode ever since June of last year, creating a narrower and narrower range around $1300/oz in that time. We are last $1296/oz.

Steel:

It’s been very quiet in steel for about two to three weeks up until yesterday. Today and yesterday we have traded 800 lots or 16,000 ST, most of it in the 2H ’14 through 1H ’15 periods. We have seen July and August increase a bit with Q3 trading last $641/ST, which is up about $5/ST from where we were two weeks ago. On the farther dated months, we are seeing buying interest come in, however we are also seeing the sellers reach to transact. The CRU came in at $687/ST or up $4/ST. Mood from spot market is that very little is going on as both sides appear content to focus on existing business/orders.

In the space below is one of our interactive graphics depicting the HRC forward curve. The graphic can only be seen when you are logged into the website and reading the newsletter or this article from there. If you need assistance getting into the members only section of the website please contact us at: info@SteelMarketUpdate.com or by phone: 800-432-3475 and we will help you.

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

Iron Ore:

Iron Ore has not recovered from its fall. A little bounce to $107/MT from its $103/MT low index level, but we have since returned all of that. On the forward curve even, we have breached the psychological $100/MT level. It’s status quo in China until the traders can see a real growth story to warrant putting back on long positions in the market. The government rhetoric and regulatory action telling them the help won’t come from there. In the meantime, the mills are just now starting to see the slightest margin and won’t be in a big hurry to replenish inventories, particularly as flush port stocks means lower Iron Ore prices. Let’s call June either side of $102.5/MT, July either side of $101.50/MT, August either side of $101/MT, Q3 either side of $101.35/MT, Q4 either side of $100.50/MT, and Cal ’15 either side of $99.25/MT.

Scrap:

Despite a number of cargos, I believe 5, going off the East Coast, the prices for CFR did not rise. In fact, it actually dipped a bit, last $374/MT, down $1-2/MT. It looks like a little inventory replenishment in what is otherwise still a tepid demand market for the Turks. In the U.S, Shred came off $10-20/GT depending on region while Bush was pretty much flat coming in at $398/GT, down almost $2/GT. The demand on Bush was supportive as the EAF’s stepped in to take orders from the Great Lakes and Gary issues. Think it’s a mixed view as to what June will provide us. Think it will depend on those specific EAFS need for further units basis their steel order lead times.  Metal Margins are as big as they’ve ever been really $280/T gross plus, so plenty of room for scrap to either go up or steel to either come down before either one affects the other one iota.

The BUS (busheling scrap) forward curve interactive graphic is located below but can only been seen when reading the newsletter/article on our website.

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