Futures

Hot Rolled Futures: Bull Market Becoming a Reality

Written by Bradley Clark

August 14, 2014

Pricing in the HRC futures market has continued slightly upward this week stemming from positive economic data and a bullish outlook within the steel industry.  September prices have been trading around $655-667, October prices have been trading between $640-657, and Q4 has traded between $645-651, all about $5-10 improvements week on week.  Further down the curve, Q1 15 and Cal 15 have seen slight upward movements, trading between $638-647.

The recent move in prices has coincided with contradicting news regarding U.S. domestic supply as well as positive economic news on the demand side.  On the supply side, ArcelorMittal’s Indiana Harbor #7 blast furnace is in the ramp up phase, which will add approximately 10,000 tons a day to the market.  Additionally, June imports increased about 46 percent compared to June, 2013.  While imports were up year over year for June, they saw a 10 percent decrease compared to the previous month.  Further supply concerns stem from US Steel’s planned outage of a mill later this year as well as AK Steel’s Ashland furnace going down 3 times this past year.  On the demand side, automotive sales have continued upward with double digit increases in sales for July.  Broader manufacturing data has also indicated an economy favoring upward price movements for steel.  The July Purchasing Manager’s Index (PMI) increased to 57.1 – the 14th consecutive month of positive gains.  Concerns over future US supply accompanied by positive U.S. economic data has firmed prices at a higher level for the near term

The overall improvement of the U.S. economy in recent months has helped bolster manufacturing and, consequently, firmed steel prices for the near future.  Going forward, the possibility of an anti-dumping suit being filed for light flat rolled steel may factor into the market and potentially push prices higher.

Volume has been quiet this past week with 6000 tons trading.

Below is an interactive graphic depicting the latest hot rolled futures forward curve with a comparison to four weeks ago. The graph can only been seen and interacted with when you are logged into the website and reading this article online (otherwise it just appears to be an empty space on your screen).

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

U.S. Midwest #1 Busheling Ferrous Scrap (AMM) Market Firming

The scrap market has continued to move sideways this past week with supply and demand continuing market equilibrium.  Increasing finished product prices in addition to stronger foreign markets for raw materials has made some slightly bullish on the market, but for the time being little has changed.  The futures market has remained quiet with nothing trading; however, the market remains well bid down the curve between $390-400.

Below is another interactive graphic, but for the latest busheling scrap forward curve in comparison to the same curve from four weeks ago.

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

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.