Hot Rolled Futures: Spot Market Encourging Buyers
Written by: André Marshall CEO Crunch Risk, LLC www.CrunchRisk.com
Well, nothing like the collective force of the world’s central banks to save the market from itself. It’s as if the European debt crisis never existed. The announcement came out that the Fed and other Central banks would do whatever necessary to help the governments with their debts, and, boom, off to the races! The markets had barely even reacted to the announcement when the Chinese government announced it was easing lending guidelines, a measure viewed as easing, but when this announcement came out the markets were spring-loaded upward.
The S+P went up 500 Pts on Tuesday before the day was over, Copper gained 19 cts!, Crude was up $1.25 and Gold was up $33. That kind of move can be explained by short covering, but today’s price action which was essentially sideways suggests that the market perception is this kind of announcement has brought some comfort that wasn’t there before. 10% up and down volatility, which is what we’ve enjoyed since July is likely not over. If it were that simple they would have made an announcement a long time ago – but it appears this measure will bring some calm to the markets at least for a bit.
I expect the markets to move higher from here. The recent highs in October are certainly in the markets sites, and the years highs from May are possibly a target for the market. We are also in year end, which makes this rally scenario even more plausible. All that said, if the market fails to take out the May high we will still be in a bear market.
HR NYMEX Steel
The market started off the week trading just under $700 to finish off today trading either side of $720. The market has traded approximately 1144 lots or 22,880 ST. The spot prices continue to encourage forward buyers to come to market albeit slowly and in fairly small quantities so far. Perspective on the ability of the market to pull of its seasonal price rally continues to diverge and price differentials in the market for both steel and scrap also lend fuel to that debate. Iron Ore futures have rallied a bit in the last day or so coming up $5-10 which has stalled that market’s very recent slide.
Although not very many concrete levels to site it appears that scrap will increase $20/T at least in the prime grades. Turkish cargos of the east coast increased those export levels by $5/T, but there the market is really competing against European and other scrap which is at competitive levels. It’s the traditional Dec. month where the market say take it now at my price or wait. With some mills having booked steel orders out through January there is definitely some appetite there for some. However, for other mills December still has to be addressed and the needs there are much less certain. The south apparently is softer than the mid-west, could very well be due to the overhang of Pig Iron in the Gulf. Scrap not driving price right now, but it’s not hurting either.
Market is soft as Turkey is not in the market and Europe is a huge question mark. The inventories are rising and no doubt it’s unwanted length being returned to the market. The cash price is approx $510 and the 3’s is $520. This is down about $10 from last week. Very little activity except position management as this market continues to heal.