Hot Rolled Coil Futures – Almost a Donut
Apr / 27 / 2012 - Hot Rolled Coil Futures – Almost a Donut
Written by: Andre Marshall, CEO Crunch Risk, LLC.
Well it was almost a donut this week with not Zero, but 10 Lots traded in the week. The market has come off $10/ST in the nearby months to $670 from $680 last week. This coincides with a $7.00/ST drop in the spot CRU market to $678/ST from $685/ST. The 2nd half 2012 has dropped about $5/ST as has the Cal ’13 mos., although in mark only on the 2013 months as the offers there have not really dropped. Offers have crept down and bids remain just below. Despite all the chatter about good demand, few are stepping up to cover. The back end is better bid which makes sense.
The middle east trouble and lack of China appetite have finally caught up with this market. We have seen a $20/MT drop in this market in two weeks with Cash now trading $480/MT and 3 months trading either side of $495/MT. This market continues to suffer from liquidity due to its past and the lack of fundamental business in the Middle East/Asia has further depleted its importance. No recovery expected in the near term in long products in this region of the world.
Iron Ore has peaked just under $150 spot and now has been failing a bit end this week having dropped $3.50/MT in the last couple days alone. The forwards appear to have stabilized and the backwardation takes the curve through the $140’s and into the high $120’s depending on how far out the curve one goes. Spot looks under pressure for now while forwards look comfortable where they are.
There is a battle of words in Scrap. Some believe we will see an increase in prices whereas other see flat to even down. There has been a lot of talk about how scrap would rise in May, that’s usually the death knell, and sure enough flows of prime are strong in the Mid West and could result in a market that is down $10-20. Some had been calling for up $10-40! Shred is tighter than prime, but talk of constrained flows may well be countered by reduced demand needed for the month due to some buyers already announcing that they are out of the market for May. The south is a little better supplied than the mid west and the Turks did not pick up cargoes this time around from East Coast yards as European scrap was cheaper and their volumes are down. So for Prime flat to down and for secondaries likely flat, maybe up in Shred by region.
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