Steel Futures Decline Further
Written by: Joseph Reinmann, CEO Kataman Metals
Prices on the CME U.S. Midwest Hot Rolled futures contract continued lower this week falling $9 per ton for the second half 2012 and declining $5 per ton for q1 2013. The June contract rolled off this week. The continued deteriorating global economic picture as well as renewed fears that China’s manufacturing will continue to slow is weighing on market sentiment as we enter the traditionally slow seasonal period.
Some news stories ran this week speculating that maybe a few mill outages this summer combined with the federal highway stimulus bill might help support steel prices, but no one in the HRC futures market appeared to put money behind these theories as prices continued to move lower all week.
The July spot price for Hot Rolled Coil on CME U.S. Midwest Hot Rolled futures contract settled yesterday at $600 down $10 from last week.
Volume on the CME U.S. Midwest Hot Rolled futures contract this week was firm as 14,600 tons (730 lots) changed hands so far this week. Sellers continue to drop their offers hoping to entice buyers.
Below is a table with yesterday’s HRC futures settlement prices on the CME contract for each individual month through 2012 as compared to last week:
LME Billet Takes a Long Overdue Pause
The LME cash billet market settled yesterday at $360.50 yesterday – little changed from last week but down $127 per ton or a staggering 26.1% from May 1st.
The three month LME steel billet price was indicated today at $390 – little changed from last week but down $120 per ton or 23.5% from May 1st.
Iron Ore Declines
The iron ore physical market finally ran out of steam this past week as traders stepped away from the market leaving miners to lower their offers in search of renewed buying interest. It seems the support of late has been held up by traders taking long positions while the mills have remained on the sidelines due to weakening steel prices in China -- and globally. The major indices the past week have fallen between $2-4 dollars to $134-135 levels.
Paper prices have fallen in line with the weakening physical market as sellers began hitting the bids down the curve at the beginning to the week and continued to offer slightly lower as the days ticked over. The q3 has softened by nearly $3 dollars trading between $129-130 and the calendar ‘13 has softened by a couple of dollars to $121-123 range.
Scrap Prices Expected to Drop $40 in July
U.S. mills have not yet entered the market for July, but market participants are expecting a drop of about $40 per ton in July. In addition, mills will be buying reduced volumes of scrap in July further exacerbating what was already an unintended buildup of scrap inventories at dealers yards. With a reservoir of so much unsold scrap, it seems unlikely that August or September scrap prices will rise until the backlog of scrap is absorbed.