HR Futures: Anemic HRC Volume Signals Market Reversal
Mar / 16 / 2012 - HR Futures: Anemic HRC Volume Signals Market Reversal
Written by: Joseph Reinmann, CEO Kataman Metals
Hot Rolled Coil (HRC) futures prices were mostly unchanged this week but increases are expected due to the recent mill price hikes announced yesterday and today. Futures buyers are anxious to buy today, but no one is willing to sell right now. HRC futures sellers literally vanished today leaving buyers stranded. It appears as if sellers are waiting to see if the physical HRC mill price increases take hold. Q2 2012 prices remained unchanged at $675 while Q3 and Q4 prices increased slightly from last week. The CME HRC contract averaged strong volumes of over 25,000 tons per week in February. However this week transactions on the CME HRC contract have come to a virtual halt trading only 19 lots (380 tons) so far this week. The lack of sellers has created the sharp slowdown in trading activity this week. Open Interest for the CME HRC contract set an all-time high of 14,701 lots on March 6, before sharply declining to 13,437 at yesterday’s close. This 8.5% decline in open interest implies that the market is liquidating, and suggests that the prevailing price trend is coming to an end. This is further confirmation that the futures market is expecting a reversal in prices from the recent downward trend.
Q2-2012 at $675 (No Change); Q3-2012 at $675 (Up $2) and Q4-2012 at $677 (Up $3).
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: CME Contract Month HRC Closing Price Change from Last Week CME Contract Month HRC Closing Price Change from Last Week
LME Billet Prices Lack Momentum
The three month LME steel billet price settled yesterday at $530 per metric ton unchanged versus last week.
The LME cash billet market settled yesterday at $515 per metric ton yesterday up $5 per ton from last week but not showing any clear strength or direction at this time.
Iron Ore Consolidates
Over the past week iron ore spot prices have remained fairly unchanged. The spot market has edged up slightly to around 144 dollars per metric ton. Demand from China this week has been subdued with few cargoes trading hands around last done levels. Stocks at port remain at historic highs -- over 100 million tons. With economic growth in China uncertain the outlook for iron ore prices remains unclear in the short term.
Forward prices have traded within a narrow $5 per ton range this week ending up $1 per ton as the week comes to a close.
March 142/144
Q2 137/139
Q3 133/136
Q4 131/134
Cal 13 127/129
Too Early to Tell which way Scrap Prices are Leaning for April
Following March in which we saw scrap prices move up, down and sideways – depending on grade and geographic location, there is no prevailing trend developing yet for April. We often look to the LME billet as an early indicator to scrap prices but as we reported above, the LME billet lacks any strong sentiment one way or another. We will stay tuned to the markets and report any new developments.
