Futures
Hot Rolled Futures Come Under Pressure
Written by David Feldstein
August 18, 2016
The following article on the hot rolled coil (HRC), busheling scrap (BUS), and financial futures markets was written by David Feldstein. As Flack Steel’s director of risk management, Dave is an active participant in the hot rolled coil (HRC) futures market and we believe he will provide insightful commentary and trading ideas to our readers. Besides writing Futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading “The Feldstein” on the Flack Steel website www.FlackSteel.com.
CME Midwest Hot Rolled Coil (HRC) futures have come under pressure again this week, especially in Q4. 31,760 short tons (st) have traded hands since last Thursday. Open interest is currently at 385,740 st
Looking back to mid-July, we can see that Q4 2016 and Q1 2017 are down about $20 in four weeks, but there has yet to be any major volatility. Also notice the curve has flattened somewhat. That being said, the curve is still far below current physical spot prices.
While the fundamental picture looks strong on the supply side (low inventory, imports, etc.). the “buyer’s strike” now in its third month has had a dramatic effect resulting in a steep drop in lead times. Are these deflationary expectations finally taking hold and forcing prices lower?
With Big River expected to start producing by year end and the surprising announcement that the hot strip at the former Wheeling Pitt mill will be opening to roll imported slabs as soon as November, the bull case is somewhat tarnished. However, strong auto sales, continued momentum in construction and a decent ISM PMI combined with the solid supply side fundamentals addressed above could provide some push back. At these low inventory levels, a supply disruption could turn the market around in a heartbeat. Post Labor Day developments will be interesting, especially if domestic mills attempt a price increase to bolster current prices.
Below are the trades executing since last Thursday.
David Feldstein
Read more from David FeldsteinLatest in Futures
HR Futures: Meaningful rally grips market
Another eventful week in the physical and financial steel markets is coming to a close. Most importantly, this week provided complete clarity that, after months of waiting for a catalyst, we are now definitively in the early stages of a meaningful rally. The 3rd month future (currently the April contract) rose more than 8% for […]
HRC and scrap futures: Markets pop on hot steel and tariff headlines
It’s been an event-filled month in US ferrous derivatives markets since my last column for SMU. There’s been no shortage of writings and musing about the ongoing steel and aluminum tariffs proposed by the Trump administration. And steel and scrap futures markets have responded accordingly. CME HRC futures prices have risen, and the curve has firmed. The February 2025 HRC futures contract, now in the pricing period, has added $47 per short ton (st) since its contact lows on Jan. 20 to settle at $767/st today.
HR Futures: What’s next for HRC and busheling prices?
Since the publication of our last market update on Dec. 10, several notable developments have shaped the landscape
HR Futures: Awaiting Trump’s 25% tariff
Midwest HRC indices have been stuck in a tight range since last summer with the weekly CRU Midwest HRC price spending the past 32 weeks between $656 and $714 per short ton (st). The rolling Midwest HRC future has been rangebound between roughly $650 to $800 since last June. The rate at which the price of HRC futures move over a certain period or “volatility” has compressed dramatically over the past few months.
HR Futures: Market coiled and ready to move in 2025?
The last six months have been littered with uncertainty and mixed signals, a choppy and rangebound market. Spot indices have largely held steady, despite the pressure from domestic mills pushing for higher prices on spot tons. This has provided a signal of a lack of upward momentum and little downside room based on mill costs. […]