Futures

HRC Futures Soften in Uncertain Market

January 23, 2014

The market has taken a decidedly bearish tone this week as many feel the first cracks in the physical market are starting to appear. While prices have come off around $5 down the forward curve, the weight is strongly on the offer side, with few buyers present.

The threat of imports and decreasing raw material costs alongside deteriorating macroeconomic sentiment appears to be the major drivers to this bearish sentiment. With that said the spot market remains fairly buoyant as prices continue to remain steady between $665-$675 / st. Whether the market is set for a prolonged pull back or merely wobbles from current levels before stabilizing again has market participants divided. What seems clearer is that any upward momentum has dissipated for the time being.

Volumes in the futures market this week remain anemic as many market participants remain on the sideline. With buyers spooked in an already backwardated market, sellers have yet to become so aggressive as to hit these low bids. As was seen last year, when the spot market falls to levels even sub $600 / st, deferred futures periods remained relatively supported. So with the current shape of the curve so discounted to spot, q4 trading around $628, there seems little potential to short the curve. All of this is transpiring to sap the market of an impetus to trade. While spot sentiment appears to be weakening, the forward curve is actually looking a bit cheap, this may be the time to buy deferred periods at the lowest levels in a year.

The physical market remains steady with prices trading around $670 per ton.

Below is the forward curve updated through Wednesday’s figures and includes what the forward curve was four weeks prior. This provides our readers with some perspective as to how the market is trending during this time period. To view the HRC (and BUS) forward curve you will need to be logged into our website. You can click on the Read Full Text at the top of this newsletter or access the article directly through the website. if you need help logging into the website please contact us at: info@SteelMarketUpdate.com or by phone: 800-432-3475 and we will assist you in the process.

{amchart id=”73″ HRC Futures Forward Curve}