Futures
Futures: HR, Busheling Prices Continue Slow March Higher as Capacity Issues Linger
Written by Jack Marshall
June 24, 2021
The following article on the hot rolled coil (HRC), scrap and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:
Hot Rolled
In June, HR futures prices have continued to push higher on an average daily volume of just over 17,000 ST per day. Since June 1, all the prices for each quarterly average have risen on modest volume. For example, based on June 1 and June 24 settles: Q3’21 rose $159/ST ($1,605 to $1,765), Q4’21 rose $205/ST ($1,370 to $1,575), Q1’22 rose $205/ST ($1,152 to $1,356), Q2’22 rose $120/ST ($1,024 to $1,144), Q3’22 rose $102/ST ($972 to $1,073). The average price value of the Cal’22 strip rose $128/ST from $1,020/ST value on June 1 to $1,148/ST today. In addition to the peak price month moving out to August from June’21, the forward curve shifted higher and some of the quarterly spreads shifted as Q3’21 to Q4’21 compressed (the discount narrowed from $235/ST to $190/ST), while the Q1’22 to Q2’22 discount widened out from $128/ST to $213/ST. The HR indexes continue to grind higher and the expectations appear to be shifting from week to week, which has lead to a fair amount of movement in the calendar spreads. Further supply constraints keep moving futures expectations further out the curve.
Below is a graph showing the history of the CME Group 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 us at info@SteelMarketUpdate.com.
Scrap
July’s strong BUS finish left the market up over $65/GT. Initial expectations for August have eased somewhat from a similar upward price expectation. However, futures prices still reflect a strong move in August with the latest settlement at $675/GT. The average value for the front 12 months of the forward curve has risen $49/GT since June 1 ($651 to $700). A number of futures months in Q3 and Q4’21 have been trading north of $700/GT.
Cal’22 has also risen $42/GT over the same time frame. Of particular interest is the HR minus the BUS spread, which for Q4’21 has risen from $695 per ton to $857 per ton thus far in June.
Below is another graph showing the history of the CME Group 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.
Jack Marshall
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