Futures

Hot Rolled Futures: Declining Futures Prices Reflect Rising Interest Rate Concerns
Written by Jack Marshall
April 21, 2022
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
Recent HR spot price increases have continued to decelerate this month as prices near $1,500/ton. Initial market metallic supply concerns related to the impact of the Ukraine/Russia war appear to have abated as better market intelligence is reflected in the HR curve. Month-to-date April, the futures curve prices have steepened and shifted considerably lower even as the spot price rose. The backwardation in the Apr’22 to Dec’22 HR futures has widened by $92/ST (1575/1317 versus 1465/1150) for the period of Apr 1st as compared to Apr 21st. The price shift lower in the HR forward curve from May’22 HR future through Dec’22 HR future represents an average of almost (-$175/ST). Some of this decline reflects some perceived future headwinds: How fast will the Federal Reserve Bank have to increase rates due to the stubbornly high inflation? How much will this dampen future HR demand?
But keep in mind before the outbreak of hostilities, the HR spot and the futures curve was valued at just above $1,030/ST. For reference, on Feb 25th the Q2’22 HR settlement average price was $382/ST lower than today’s settlement, the Q3’22 HR settlement average price was $242/ST lower than today’s settlement, and the Q4’22 HR settlement average was $169/ST lower than today’s settlement. After the initial market movement, calm seems to be returning to the HR markets. Declining import HR prices and an easing of prices paid for export scrap seem to be pointing to less tight markets. The question is, how much longer until we revert to the pre-war prices?
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
Month-to-date April 2022 BUS futures have retraced most of the war premium built in due to global supply concerns. The latter half of 2022 futures settlements are hovering just shy of $590/GT, which reflects no change when compared to Feb 25th.
May BUS price has declined $165/GT since April 1st and settled today just $95/GT above its close on Feb 25th. News that mills have pig iron through the end of 2023 and softening export scrap prices has reversed the initial BUS price surge.
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
Read more from Jack MarshallLatest in Futures

HR Futures: Nascent rally in HRC futures settles above 6-week downtrend
The CME Midwest HRC futures market’s response to Trump’s election and subsequent comments about blanket 25% tariffs on Canada and Mexico was surprisingly counterintuitive.

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.