Thin Summer Markets in Hot Rolled Futures

HR futures prices have moved $12-$27/ST higher on very light trading volumes this past week.  In spite of the higher HR futures prices, Q4’17 HR last traded at $640/ST[$32/cwt] up $20/ST in the week. Buyers continue to bid at or above the previous trade prices, mainly driven by expected mill price increases and the anticipated tariffs that might result from the U.S. DOC Section 232 investigation report. Concern over low service center inventories of HR, as well as potential supply constraints, have lead natural HR sellers to continue moving their offers higher. Last week, HR futures curve values were flat at $620/ST for near, middle and far end of the curve. This week the curve is slightly backwardated with the front up over $20/ST[$1/cwt] and the back up over $12/ST[$0.60/cwt]. 

Below is a graph showing the history of the hot rolled futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.

Scrap

Current scrap demand for both prime grades and obsolete, both domestically and for export, have also been price supportive for HR futures. Recent higher futures prices in 80/20 to just north of $300/MT have yet to be followed by any physical cargoes trading above $300/MT out of the U.S.  However, higher export prices have helped keep obsolete scrap prices well supported. BUS prices rose, helped by delivery issues via rail and lower auto scrap availability due to plant maintenance. This week Q4’17 BUS traded at $355/GT, which is only $11 below the latest July index settlement and flat to the previous month’s index. Hence the backwardation in BUS has been compressing. The spread between BUS and HR futures is currently running between $280 and $290 for most periods.

Below is another graph showing the history of the busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.