Futures
Hot Rolled Futures: Mixed Bag Leaves Market Divided
Written by Jack Marshall
October 21, 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
Three minutes of weightlessness before gravity takes hold!
This month has been a mixed bag in HR futures. Lack of a clear trend and uncertainty due to COVID-19 supply-chain issues has left the market divided. Forecasters are trying to answer the following questions: Given that HR demand remains robust, have HR imports increased enough to offset the lower domestic mill production rates triggered by COVID? How soon will the new mill production facilities impact supply?
Spot appears to be somewhat rangebound just north of $1,900/ST with futures hedging activity either extremely muted or extremely active. Previous monthly hedging activity was more consistent. The Dec’21 HR through Feb’22 HR months have been supported of late, which could signal a slower price retracement in the near term. Yesterday, HR futures volume was over 60,000 ST with most months through Dec’22 averaging about 4,000 ST and Oct’21, the front month volume, north of 8,300 ST. Interestingly Q4’21 and Q1’22 average prices ($1,795 and $1,423) are unchanged when you compare Oct. 1 and Oct. 21 settlements, while the latter 12-month quarters are lower by just about $33/ST per quarter. Based on the latest CAL’22 HR settles – Jan’22 HR minus Dec’22 HR leaves a $595/ST discount versus a $530/ST discount from the Oct. 1 settle.
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
BUS prices have seen a healthy pickup in the last week or so. Early chatter has prime scrap up $40/GT, coinciding with a healthy rise in export cargoes of 80/20 scrap, which are up over $45/MT.
Near date BUS is valued around $625/GT. Most of the BUS futures curve reflects the anticipated $40/GT increase in spot.
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.
Editor’s note: Want to learn more about steel futures? Registration is open for SMU’s Introduction to Steel Hedging: Managing Price Risk Workshop to be held Nov. 2-3. You can get more information by clicking here.
Jack Marshall
Read more from Jack MarshallLatest 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. […]