Hot Rolled Futures: Just a Bounce?

We are 1866 last S+P 500, having recovered from the last dip down on Putin aggression headlines when we hit 1832 on the 14th. This is a bull market no doubt, showing little signs of being scared by anything really. As I mentioned, we are headed to 1900 before any retracement in site. Crude has settled into a range of $97-$99/bbl now that the global sabre rattling is more accepted. Chart wise, this suggests we head lower still, unless economic data starts improving quickly. In Copper, it has been a real seesaw as we went from $2.96/lb to $2.88/lb to $2.99/lb, all in the course of about a day. No real explanation except that the market broke $3.00/lb on the way down and this has dried up some liquidity in either direction. We are last $2.9275/lb., yes down 5cts again today, and likely headed lower over time as Chinese stocks continue to build on exchange as finance schemes get unwound. Gold, clearly has come under pressure as the Crimea situation has become more clear (it was taken!), this continues the decline since the 1387.70 high on March 14th. Still looks like a modest retracement relative to the rebound rally which started at 1187 on Dec. 19th.

Steel

Last week was punctuated by a flat curve at $620/ST while this week is shaping up at about $15/ST higher. We traded Q2 @ $635/ST today which is $13 higher than Tuesday’s settle. It was a good week in futures with 2725 lots trading in the week or 54,500 ST. All of this was in the Q2, Q3 and Q4 periods. CRU meanwhile came out at $622/ST, or down $5/ST, while mills all raised prices in unison by $40/ST. We will see how it plays out. Looks like stability for now regardless.

The white space you see below is for our interactive graphic on the HRC forward curve. You can see the graphic by reading this article when logged into our website.

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

Iron Ore

We have held steady on this rebound just under $110/MT. Seems the market is comfortable with this level here as it is not far from marginal Chinese production costs. Caveat will be if steel production actually starts getting curtailed due to economic drivers, or smog ones. If that happens, marginal costs won’t matter and we will head lower. So what growth there is in China right now is what will drive price from here as any trader sentiment moves look unlikely given the governments apparent willingness to let the economy cool to as low as 6% growth. Let’s call April 108.75, May 107.50, June 106.75, Q3 106.25, Q4 105.5, and Cal ’15 104.25.

Scrap

CFR Turkey has rallied to $371/MT on the back of recent cargo sales to the Turks from here and from Europe. This coincides with their inventory rebuilding heading into their debar production season. Once this rebuilding is done, the market should settle down once again as poor fundamentals reset reality. Domestically it’s anyone’s guess as to what scrap prices will do, opinions range from $10 down to $10 up. The reality will depend on where east coast yards want to replenish, what mill inventories look like after this recent round of reaching for orders, and how comfortable dealers feel holding anything back going into Spring. Rebounds in exports help sentiment, but I’m guessing flows and inventories will dictate reality.

Below is the interactive graphic associated with scrap futures. As with HRC above both can be seen when logged into the Steel Market Update website.

{amchart id=”74″ BUS Futures Forward Curve}