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: 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 […]
HR Futures: Uncertainty hangs over the steel market
Uncertainty has remained a dominant theme in the US ferrous derivatives markets over the past month. And the Trump administration's tariffs on steel and aluminum are still top of mind for market participants.
HR Futures: Major trade developments lift the ferrous complex
Headline risk has returned to the ferrous complex, with both hot-rolled coil (HRC) and busheling ferrous scrap (BCH) markets surging in response to fresh trade restrictions.
HR Futures: Midwest ferrous futures consolidate gains, market anxiously awaits next move
Four weeks have passed since the last article from Rock Trading Advisors on January 30. The paint has dried, and Midwest HRC futures have exploded higher in response to President Trump’s declaration of impending 25% tariffs on all imported steel products. The rolling 2nd month CME Midwest HRC future erupted through the top end of its downtrend, one that dates back to the peak of the winter 2022 rally. It also broke out of its narrow range seen dating back to June of last year.