HR Futures: Indecision Remains with Neutral to Bearish Sentiment

HR spot physical indexes have remained anchored just above the mid-$700/net ton area with one more week to go before the average is set. Meanwhile, the CME HR futures curve has shifted about $50/ton lower for Cal’23 months and the near dates have lost about $25/ton since the start of October. That leaves the latest Cal’23 HR average value as of yesterday’s settle basically at the current index spot value for the month. The Q1’23 average value at $731/ton versus the Q4’23 average value at $780/ton reflects only a $50/ton contango.

Open interest this month has mostly surfaced in the H1’23 leaving the latter half of Cal’23 pretty quiet. Month to date we have recovered about 50,000 tons of open interest since the beginning of the month, or roughly 75% of the open interest that rolled off at the end of September. With continued inflationary concerns and US midterm elections in the offing, volumes have been somewhat subdued as market participants wait on the sidelines for news to spur hedging for the next six-month period.

Below is a graph showing the history of the CME Group HR 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

Current scrap collections remain well below the average for the last year. Export shipments to Turkey have fallen way off as exports to India pick up. The market waits for the excess scrap collections post the Ukraine/Russia conflict to be whittled down. Early BUS talk has prime scrap sliding about another $10/gross ton from the October settle ($386.57/gross ton). Month to date October, the BUS futures curve is only marginally softer. Latest Cal’23 BUS traded at $410/gross ton.

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.

By Jack Marshall of Crunch Risk LLC