Hot Rolled Futures: Bull Market Becoming a Reality

Pricing in the HRC futures market has continued slightly upward this week stemming from positive economic data and a bullish outlook within the steel industry.  September prices have been trading around $655-667, October prices have been trading between $640-657, and Q4 has traded between $645-651, all about $5-10 improvements week on week.  Further down the curve, Q1 15 and Cal 15 have seen slight upward movements, trading between $638-647.

The recent move in prices has coincided with contradicting news regarding U.S. domestic supply as well as positive economic news on the demand side.  On the supply side, ArcelorMittal’s Indiana Harbor #7 blast furnace is in the ramp up phase, which will add approximately 10,000 tons a day to the market.  Additionally, June imports increased about 46 percent compared to June, 2013.  While imports were up year over year for June, they saw a 10 percent decrease compared to the previous month.  Further supply concerns stem from US Steel’s planned outage of a mill later this year as well as AK Steel’s Ashland furnace going down 3 times this past year.  On the demand side, automotive sales have continued upward with double digit increases in sales for July.  Broader manufacturing data has also indicated an economy favoring upward price movements for steel.  The July Purchasing Manager’s Index (PMI) increased to 57.1 – the 14th consecutive month of positive gains.  Concerns over future US supply accompanied by positive U.S. economic data has firmed prices at a higher level for the near term