Futures
Hot Rolled Futures: Backwardated to the Future
Written by David Feldstein
March 23, 2017
The following article on the hot rolled coil (HRC) futures markets was written by David Feldstein. As the Flack Global Metals 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 Global Markets website www.FlackGlobalMetals.com.
Ferrous Futures have been under some pressure over the past week. All three curves remain steeply backwardated.
April LME Turkish scrap futures fall $17.5 to $282.5/t in the past week.
April LME Turkish Scrap & Curve
April SGX iron futures fell to $83/t with the IODEX printing $84.75/t Wednesday night. Iron ore’s steep backwardation may be the primary reason US Midwest HRC prices are backwardated.
April SGX Iron Ore Futures & Curve
April CME Midwest HRC Futures settled at $649/st Wednesday. May settled at $640/st and June settled at $635. European and Chinese HRC have plateaued at current levels for months while the US price continues to move higher. Flat rolled imports continue to be a non-factor and the strength in global prices has provided little new opportunities on the import front. Even if there was an influx of attractive imported tons, there is a three to six month lag time on those orders and data shows service center and OEM inventory levels are relatively low. Demand remains strong and robust across many sectors with a nascent rebound in the energy industry the most intriguing.
However, if oil prices continue to fall causing the rig count and/or production to reverse course, then expect flat rolled prices to follow suit. If scrap and/or iron ore prices continue to fall rapidly, this could spook buyers and pressure HRC prices lower as well. Otherwise, steel industry fundamentals remain strong and the future looks constructive.
April CME Midwest HRC Futures & Curve
I’ve been watching Q3 and Q4 2017 currently around $610/st and $595/st, respectively. The 6 percent and 10 percent delta below the April futures and spot indexes is intriguing.
David Feldstein
Read more from David FeldsteinLatest in Futures
HR Futures: Market at crossroads after turbulent run
The market appears to be pausing after a turbulent run. But tension remains just beneath the surface. With net long positioning still elevated, sentiment-driven selling could quickly reignite volatility. Still, supply constraints and limited imports are laying the groundwork for a resilient physical market. This moment of calm feels more like a crossroads than a conclusion.
HR Futures: Traders’ views mixed as market navigates tariffs
A look at the HR futures market.
Market pressures trigger HR futures reversal
Market dynamics are shifting rapidly, with futures pricing diverging from physical fundamentals, creating a complex landscape for steel traders.
HR Futures: Correction in market after big rally
Another eventful week in the physical and financial steel markets is coming to a close, but with a markedly different tone than the last update at the end of February.
HR Futures: Market drifts lower on light volume
Over the past couple of weeks, Midwest HRC futures have been drifting lower on light volume. This begs the question if the rally has run out of steam, or is it catching its breath after ripping roughly $150 in less than two weeks? The April CME Midwest HRC future made an intraday high at $976 […]