HR futures: Trade case action official - It was already priced in?!

This is the third straight month in which spot price weakness has been felt both on the index level and the forwards, which overall have come off massively this year. Spot month September futures had a peak this year of $879/st. This itself was a nosedive from the start of the year as September had touched an amazing $1,149/st during late December of last year. With one print down and three to go, even if mills can make a move, we are still likely to average out in the $700-715/st range optimistically, perhaps lower if the index does not respond quickly to mills efforts to get prices up.

Farther forward, going into this month the October low was $723/st back on July 23, so we are trading right around that same level here in September now. (Actually, $723/st is the October bid on CME globex at the time of this writing.) December also is remarkably unchanged from a month ago even with the trade case news no longer a rumor but actually playing out in some ways as we would have expected. It’s now a broad ranging trade action that encompasses USMCA members Mexico and Canada. Additionally, there is a greater possibility of blocking the Nippon play for U.S. Steel deal with recent news from the White House.

It seems like from here we are going to need to see some real follow through on spot price increases before the market is willing to price in much additional premium over the current spot levels. But there was a certain uneasiness on Thursday that really had things crazy for a moment. October was trading above $745/st briefly, and markets were approaching $50/st day-over-day increases in some cases before eventually backing off and settling lower. It was still an extreme intraday move for HRC. Will we see more of that, or will the announcement now being made crystalize some things? Check back next month and we will sort out how it was priced in.

Source: data is from Comex HRC futures settlement prices as published by CME group.

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