Hot Rolled Futures: Stable on the Horizon?

Financial Markets:

The S&P is at 2095 and stable and looking ready to move higher after taking out the old highs. Easy monetary policy is intact and as long as it is this market appears to be supported. Dollar strength on the other hand is a problem for our economy moving forward as exporters begin to struggle in the global market. The flip side to that is a stronger dollar means continued cheaper commodities, which are all produced globally, but priced in dollars. It will be interesting to see what the Fed comes up with because higher rates are not what the doctor ordered.

The commodity markets meanwhile have held on to their recent gains with crude oil last $52.05/bbl on the March contract. This market has remained in its $50-$55/bbl band since the beginning of the month, which is a fairly positive sign (read bull flag). The caveat to that statement is that on  Feb 17th the market put in a high of $54.92/bbl which failed to take out the Feb 3rd high of $55.05/bbl. This could be what causes this bull flag to fail, I hope not, Houstonian that I am. Copper meanwhile is last $2.6155/lb. and looking near term bullish, for pretty much every day, except today, we’ve had higher highs this month. Looks like stability off the bottom here for now.

Steel:

In steel we have traded 429 lots of futures in the week or 8,580 short tons (ST). Same story of futures tracking the spot downward, where sellers need to reach to existing bids to get things done. The CRU came in $517/ST which is $20/ST drop from the prior week with spot deals finally transacting and those deals getting reported and affecting the weighting in the index. As pent up March orders continue to get placed, the CRU will adjust down the coming week or so. From there, it will depend on the spread between import and domestic and whether there is any sign of trade case rumor circling. The Q2 has traded as low as $525/ST, which we did yesterday. The Q3 has traded today at $540/ST, and Q4 can be bought around $560/ST. Little interest has developed as yet in the Calendar ’16 mos…

 Below is an interactive graph of the HRC Futures Forward Curve. The graph can only be seen when reading this article while logged into our Steel Market Update website:

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

Iron Ore:

We appear to be fairly stable in this market as the Chinese New Year started in earnest today. We are last $62/MT approximately on the index with little activity, and futures that have come off 25-50 cents on the prior day and retraced back the 75cents-$1 they had accumulated the prior two days. Still stable here in iron Ore. Let’s call April ’15 last either side of $62.75/MT, May either side of $62.50/MT, Q3 either side of $60.50/MT, and Q4 either side of $59.85/MT.

Scrap:

Again pretty stable here as well on CFR Turkey at $242/MT zone. Not much spot activity to really move it, but no pressure there either. Lots of rumor about how domestic March price will come off again as the dealers couldn’t sell all the February they needed to. To the degree that the yards have to move material, fine!, but I think this will depend on to what degree mills have succeeded in picking up orders down here, and to what degree dealers are really going to be all that aggressive starting at such a low price already and now with poor flows. We’ll see! I would guess more sideways after such a move down in February. 

Another one of our interactive graphs is below with the BUS (CME Busheling Scrap) forward curve.

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