Steel Futures Consolidate – Andre Marshall, President Crunch Risk, LLC

HR Futures

Hot Rolled futures have consolidated at the $725-$730 level for the 2nd half of the year and the $750-$755 area for Calendar Year ’12. When the market first started its decline thefutures market for the 2nd Half got down as low as the $700 area - if you discount the one day somebody offered it down to $675 – from there the offers backed off to the $750 range upon learning of the steel mill price announcements.

Now sellers appear to be re-entering and have come down on their expectations. There is a decent amount of buying interest around, but as yet the buyers are willing to wait for their price levels, which are closer to $720, and thus there has not been a lot of trading.

Third Quarter traded yesterday at $730 area, but beyond that the market is still trying to find its next trade level. This past week the spot price rose $3/short ton on the back of $40/short ton price hikes announced by mills last week and $20 increase in prime scrap for June, not a very bullish reaction. The spot market will dictate what futures do next. Anecdotal evidence suggests spot deals getting done even well below last reported so we’ll see how that plays out.

LME Billet

Similar action was found in Billet in that it too rallied, in this case it rallied back to the top of its range around $570, where it was summarily SOLD. In Billet’s case it was a lot of talk about tight Black Sea supply (what’s new) and “to be very soon aggressive Iranians”. Well apparently it wasn’t enough to sustain the rally whereby the market has consolidated back to the $550 area on 3’s.

The cash market remains back-wardated, but less so than it was. Whereas some think that Prime scrap in the US will remain pretty tight through the next couple months, that thought does not necessarily translate to secondary scrap markets where the Turks had really lifted the yards out of their huge inventory positions with all their recent aggressive buying.

Stable is the consensus unless the flows really pick due to finally better weather conditions, which is a distinct possibility. Time will tell.

Andre Marshall is one of the most active brokers in the North American and European hot rolled futures markets. Mr. Marshall will be the instructor for our upcoming Hedging Price Risk workshop to be held at the CME Group/Chicago Board of Trade in downtown Chicago on July 12th. You can find out more information about the workshop by going to our website: www.SteelMarketUpdate.com/Events or by clicking on the Hedging link.