Hot Rolled Futures: In the Trade Zone
Written by: Andre Marshall, CEO Crunch Risk, LLC
Hot Rolled NYMEX:
It was a pretty steady week of business with 815 lots having traded, or 16,300 ST as we are in the zone where buyers and sellers are prepared to meet. All of the trades were in the balance of 2012. The futures market prices are down about another $5-$7/Short Ton (ST).
Today RG announcement was out that they will shutter ALL of their plants by June 4th. The addition of Warren was a bit of a surprise so the effect is closer to 2-2.5 million versus the 1+ million tons expected that would come out from Sparrows alone. The market reacted by lifting the offers on the screen, which were the prior evening valuation level. However, beyond that, there appears to be muted response from buyers on forward markets basis this ever so long coming news. Although business is still decent for some their inventories are building quickly as mill lead times have shrunk even further.
A $418/Metric Ton (MT) cash settle and a $431 3-months settle put this market in the bottom of its range. The scary part is that bids are quite a bit lower than the numbers mentioned in the prior sentence with cash interest around $370/MT. Nothing on the horizon for Asia or the Middle East or Europe that will help this market in the immediate term.
Iron Ore consolidated end week but remains under pressure and the forward sentiment Is not good. We are down another $2-4/Ton this week.
Scrap looks like it’s headed for a swan dive this month. Early trade talk and banter suggests $30-$40 down, but $50 down cannot be ruled out. Shredders are said to be glutting the market and the closure of RG will certainly not bode well for scrap demand. Earlier in week Turkey sales at $435 CNF for mixed cargo were down $20/T so that sets the opening tone at a minimum on secondary. Prime will continue to be even more flush than secondaries save for maybe these shred flows that have all of a sudden appeared, hmm.
SMU Note: Andre Marshall is the main instructor for our Managing Price Risk workshops - the next one being held at the Chicago Board of Trade in Downtown Chicago, IL on July 25, 2012.