Iron Ore, Scrap Futures - Ore Quiet Due to Holiday – Scrap Climbs

Written by Bradley Clark

TSI Iron Ore: Market Quiet During Chinese Golden Week…
Iron ore prices have remained steady over the past week as the Chinese have been off for their Golden Week holiday.  Demand while steady appears to be seen as fragile by many.  The market remains in backwardation with prices down the curve continuing to trade at a discount to current spot pricing. The current spot price is around $131/ton with the q4 trading at $126, q1 ’14 at 122 and cal 14 at $110.  Market participants await the return of their Chinese counterparts to give renewed impetus and direction to the market. Volumes have been down this week understandably but remain very robust.

U.S. Midwest #1 Busheling Ferrous Scrap (AMM) Prices Climb
The busheling market has shown unexpected strength this week after early signs the market would soften in October.  Initially sentiment suggested the market would settle around $10 down this month, but recent mill price hikes and steady mill buying has caused the market to do a complete 180 with most deals being concluded sideways at worst from last month’s pricing. The physical market strength has filtered into the futures market with bids returning to the market looking for offers around $390-400 for q4 periods. No trades have been reported but there has been a definite resumption of interest particularly from buyers this week as the physical market begins to price.

Expectations are for the index to be relatively unchanged from last month’s print of $400.07 when it comes out next Thursday the 10th.

Again, there have been no reported trades this past week.

Latest in Futures

HRC futures: ‘Normalcy’ not seen on near-term horizon

Over my years of observing the steel market, there's been a recurring belief that current market disruptions in either the physical spot market or steel futures are temporary anomalies, destined to fade, and that normalcy will soon return. However, the events of the first few weeks of 2024 served as a stark reminder that this expectation seldom materializes, and that the US steel market is still the most volatile steel market in the world.

HRC futures: Understanding and addressing HRC basis risk

It’s no secret that HRC futures have been particularly volatile over the past several years. The most recent instance was the outsized break in the March futures contract early this week. For companies procuring raw material in anticipation of higher prices or even to get ahead on future purchase orders from customers, understanding the relative price of that raw material versus the hot-rolled coil futures curve is important.

HRC futures: A flock of canaries in the mine

Much has happened since we last met on Jan. 4. Cleveland-Cliffs announced a price increase on Jan. 3, lifting the futures market in the morning only for it to finish the day $20-$30 per short ton (st) below those morning highs. On Jan. 4, the futures curve was down another $10-$28/st. And in my column for SMU that evening, I asked a question: Would those aggressive sellers be met with a short-squeeze forcing them to cover, or had the market peaked with the negative price action to start the year the proverbial canary in the coal mine?