Futures
HR futures: June trading remains muted
Written by Mark Novakovich
June 13, 2024
Trading activity for the CME HRC futures contract has been sporadic so far in June, with a few days seeing transacted volumes exceed 25,000 short tons (st). But overall activity remains muted. This follows a pattern that emerged over the course of May.
Total open interest in the HRC contract is 488,000 st, down roughly 75,000 st from the highs seen towards the latter part of May. The entire curve structure has come under pressure. But the front end has softened the most dramatically, following a weakening physical market. Physical traders have reported soft demand and high inventory levels, which are moving slowly. Some participants have reported seeing tonnage offered in the mid-to-high $600s, with some July capacity still said to be available.
Yesterday’s sideways CRU print did little to guide the market. Other indices are in the $710-$730 range. And Nucor’s most recent Consumer Spot Price (CSP) stands at $720. Futures markets have corroborated the nearby weakness, with the June HRC futures contract falling by $70/st since the beginning of May. The July HRC futures contract is down nearly $100/st over the same period. Technical/pattern-type traders and funds appear to be net sellers and have further bolstered the recent downside momentum in the HRC futures.
However, the July-to-December futures structure currently sits at a nearly $100 contango. That may start to draw some interest from cash-and-carry players. While commercial interest continues to be largely sidelined, hedge buyers may start to sense an opportunity and support a near-term bottoming.
Interest and activity in the CME’s busheling scrap contact (BUS) continues to decline, with open interest dropping by over 25% since the expiration of the June contract. Some scrap participants have cited frustration with the accuracy of the underlying index used to settle the contract, as well as the lag of the monthly timing. Nevertheless, there is some fundamental buy-side interest, particularly in the deferred positions. But no material sellers have appeared with offers.
Disclaimer: The content of this article is for informational purposes only. The views in this article do not represent financial services or advice. Any opinion expressed should not be treated as a specific inducement to make a particular investment or follow a particular strategy. Views and forecasts expressed are as of date indicated. They are subject to change without notice, may not come to be, and do not represent a recommendation or offer of any particular security, strategy or investment. Strategies mentioned may not be suitable for you. You must make an independent decision regarding investments or strategies mentioned in this article. It is recommended you consider your own particular circumstances and seek the advice from a financial professional before taking action in financial markets.
Mark Novakovich
Read more from Mark NovakovichLatest 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. […]