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    January 5, 2014

    HRC Futures 2013 a Tale of Two Halves…

    Written by John Packard

    The year 2013 for hot rolled steel futures was a story of two halves, with the beginning of the year trading in a strong contango and the second half of the year stuck in backwardation. The beginning of the year was characterized by low prices and significant volatility while the second half of the year saw prices move higher as volatility declined. The end of the year went out with a whimper as prices softened ever so slightly over the holiday period with very limited trading.

    The past few months have seen prices move in a very narrow range, both in the physical spot market as well as the futures market.  It seems that while uncertainty persisted in terms of sentiment in the physical market, actual movement in prices have not been significant. Questions remain over what impact the lack of CRU minus deals will have on both volatility and spurring imports, both of these topics will be in the forefront in 2014. It seems to many the trading range for HRC will be stuck between the low 600s and high 600s but with increased volatility. This increased volatility should spark greater imports as the domestic/foreign price spreads should widen to replacement values more often this year than last. Already, the forward curve is pricing in a severe drop in prices as we come to the second quarter this year, due in large part to the amount of imported steel set to arrive in the next few months.

    John Packard

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