Futures
HRC Futures: Supply/Demand Uncertainty Pushes HR Forward Curve Lower and Flatter
Written by Jack Marshall
August 3, 2023
The summer cycle has brought more focus around the uncertainty of where HR prices are headed.
Spot indexes continue to bleed lower despite price hikes from sheet mills. Market talk is of still lower prices as the gap grows between the slow-moving index versus expectations for HR future prices declines. (The index likely reflects smaller, higher priced retail type transactions as volumes have decreased over the summer months.)
In the last month, HR futures open interest has again dropped to just over 20,000 contracts. which is about 10,000 lower than the beginning of the year. Forward prices are both declining and converging at the same time as this uncertainty grows.
This is reflected in changes in the settlement prices over the last month. For the Aug’23 through the Jul’24 HR curve settlements, we have witnessed a drop of $55 per short ton (ST) for the average price of the strip. ($836/ST average Aug’23-Jul’24 versus $781/ST average as of yesterday’s settlements).
In addition the price differential between the nearby month and the 12th month forward has shrunk from $105/ST to $25/ST, leaving the HR curve considerably flatter. Typically HR futures prices do not remain flat for long.
The upcoming UAW contract negotiations will likely add market volatility to HR in addition to tighter money conditions.
BUS futures prices have lately been stuck in a small, tight range with the forward curve basically flat.
The current settlement curve for BUS futures remains between $445 per gross ton (GT) and $460/GT.
Volumes have been moderately light reflecting the slower nature of the HR futures. Tightening of the spread between domestic and imported HR could see the latter half of the BUS curve rise as capacity utilization is nudged higher by the US mills.
Market chatter has Aug’23 BUS sideways to Jul’23 ($460 settlement).
Jack Marshall
Read more from Jack MarshallLatest in Futures
HR Futures: Market drifts lower on light volume
Over the past couple of weeks, Midwest HRC futures have been drifting lower on light volume. This begs the question if the rally has run out of steam, or is it catching its breath after ripping roughly $150 in less than two weeks? The April CME Midwest HRC future made an intraday high at $976 […]
HR Futures: Uncertainty hangs over the steel market
Uncertainty has remained a dominant theme in the US ferrous derivatives markets over the past month. And the Trump administration's tariffs on steel and aluminum are still top of mind for market participants.
HR Futures: Major trade developments lift the ferrous complex
Headline risk has returned to the ferrous complex, with both hot-rolled coil (HRC) and busheling ferrous scrap (BCH) markets surging in response to fresh trade restrictions.
HR Futures: Midwest ferrous futures consolidate gains, market anxiously awaits next move
Four weeks have passed since the last article from Rock Trading Advisors on January 30. The paint has dried, and Midwest HRC futures have exploded higher in response to President Trump’s declaration of impending 25% tariffs on all imported steel products. The rolling 2nd month CME Midwest HRC future erupted through the top end of its downtrend, one that dates back to the peak of the winter 2022 rally. It also broke out of its narrow range seen dating back to June of last year.
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 […]