Written by: Joseph Reinmann, CEO Kataman Metals

In last week’s issue of Steel Market Update, we informed SMU members that Hot Rolled Coil (HRC) futures prices on the CME were on the verge of topping out and reversing course. And that is exactly what happened this week.

HRC prices on the CME fell by an average $12 per ton this week for calendar year 2012. The 4th Quarter 2012 was particularly hard hit with prices dropping $19 to $686 per ton at yesterday’s close. February and March seem to be holding up the best with prices between $725 and $730, but the selling pressure remains fairly heavy from April through December.

HRC futures volume this week was strong – even in spite of the CME being closed for holiday on Monday. Volume this week surged 39% versus this time last week on the CME U.S. Midwest Hot Rolled futures contract with 16,760 tons (838 lots) changing hands. Seller’s were anxious to unload their positions this week.

Following are yesterday’s settlement prices by quarter as compared to our report from last week:

Q1-2012 at $729 (Down $11), Q2-2012 at $713 (Down $12); Q3-2012 at $700 (Down $5) and Q4-2012 at $686 (Down $19).

Below is a table with yesterday’s HRC futures settlement prices on the CME contract for each individual month through December 2012:

LME Billet Remains Soft

The three month LME steel billet price was trading today in the $535 per metric ton range unchanged from last week but down $20 since January 1. The three month LME billet peaked on December 13 at $575.

The LME billet Cash market was trading today at $520 per metric ton down about $10 per ton from last week but down $40 so far since January 1. The Cash LME billet peaked on December 16 at $565.

February Scrap Prices Trending Down

Sources tell us that shredded scrap has already traded down $30 per long ton from early January levels.

We’ve also been told that shredder operators are dropping their scale prices in anticipation of lower shred prices in February. The mild winter weather patterns have enabled a strong, uninterrupted flow of scrap into dealer yards so far this month and scrap dealers do not want to be caught with excess inventory heading into a falling market.

Further adding to the negative sentiment are reports that pig iron is currently oversupplied which is dampening demand for scrap at numerous steel mills.