Hot Rolled Futures Decline $23 per ton this Week
Written by: Joseph P. Reinmann, CEO Kataman Metals
Buyers Take Advantage of Lower Prices
Settlement prices on the CME U.S. Midwest Hot Rolled futures contract declined again this week continuing the downward spiral. The average Hot Rolled Coil (HRC) settlement price for Second Half 2011 on CME fell by $23 per ton to $701 from $724 last week. 2012 HRC futures fell by an average of $22 per ton to $760 on average as per yesterday’s settlement prices versus last week. 2Q 2012 traded yesterday at $755.
Volume surged this week on the CME U.S. Midwest Hot Rolled futures contract as buyers took advantage of lower prices. 15,700 tons (785 lots) of HRC futures traded on the CME U.S. Midwest Hot Rolled futures contract so far this week. That represents a volume surge of nearly 250% versus this time last week.
Below is a table with yesterday’s HRC futures settlement prices on the CME contract for each month in 2011.
LME Billet Remains in a Narrow Range
The three month LME Billet price settled yesterday at $585 and steadfastly remains within the $550 to $600 trading range where it has been since January. No new trends have developed either upward or downward this week in the LME Billet market that can provide us with any market clues.
Scrap Prices Projected to be Weaker in August
In light of the falling HRC prices, many scrap market participants are expecting ferrous scrap prices to drop in August. Early indications are that scrap prices could drop between $15 and $20 per ton from July levels. Over the next two weeks August scrap prices will come more into focus.
It’s also worth noting that the observance of Ramadan starts August 1 and continues for 30 days. Historically, during Ramadan scrap buying activity from Turkey tends to be dormant. However, keep in mind that towards the end of Ramadan scrap purchases from Turkey historically surge. We will keep an eye on this market development as we approach the end of August.