The Hot Rolled Futures markets took a “tumble” on Tuesday as the forward curve dropped by $50 per ton. I spoke with Andre Marshall of Crunch Risk, an active broker in the HR Futures markets and our instructor for our Hedging Price Risk workshop , about the meaning of the adjustment to the Forward Curve from a broker’s perspective. He told Steel Market Update:

“Strange day in the Hot Rolled Coil futures market as very late day the Aug/Dec period got offered down from $730/ST all the way to down $678/ST. Even more interesting than this seller’s offers was the fact the not one buyer lifted those offers – end user, service center or even a trader. Wow! Could the futures once again be telling the market something?! The buyers didn’t believe the futures market last fall when it was reflecting $640/ST in a spot market environment of $540/ST. Can the sellers afford to ignore the curve this time? Only time will tell.”

For those who are not aware of market prices for hot rolled coil, the current Steel Market Update index for hot rolled is $760 per ton. Hot rolled prices peaked a number of weeks ago at just below $900 per ton (ST = short ton).

At this time, the U.S. steel mills are attempting to put a bottom to the fall in steel prices so it is quite interesting the futures market is indicating and expectation of lower prices than where we are in the physical market at this moment.

The hot rolled futures market is something Steel Market Update encourages our readers to follow and become familiar. HR Futures are traded on the CME and is a financial instrument which does not include taking physical delivery of actual hot rolled coil.

Steel Market Update conducts classes on the hot rolled futures markets and other hedging price risk strategies with Andre Marshall, CEO and one of the most active brokers involved in the HR futures markets both here and in Europe. Our next workshop will be held at the CME/Chicago Board of Trade building in downtown Chicago on July 12, 2011 and will include a tour of the CME trading floor.

If you want to learn more about what all this means to you, your business and your company we invite you to participate in one of our Hedging Price Risk workshops which you can find out more about on our website: www.SteelMarketUpdate.com/events.

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