Hot Rolled Futures: Holiday Slowdown

Written by Bradley Clark

The following article on the hot rolled futures market comes to SMU from contributing writer Bradley Clark, Director of Steel Trading for Kataman Metals.

Hot rolled coil futures have been quite inactive the past week due to the Thanksgiving holiday.  As activity picks back up, it appears the next move will be lower.  The forward curve is flattening out with CRU at $623 and Q1 trading around $620 – $5-10 dollars per ton lower than last week.  Q2 and Q3 are a bit lower with trades ranging from $616 to $620.

The domestic market remains soft as raw material prices remain low and cheap imports continue to flow into the U.S.  Freight prices are also coming down as the price of oil continues lower with OPEC deciding not to cut production.  This lack of support became clearer with price hikes failing to find support in recent weeks.

Imported tons from Russia should decrease after December 19th; however, with hot rolled imports up almost 50 percent year over year, the lack of Russian tonnage coming in the beginning of 2015 is likely to be offset by other regions benefitting from low raw material costs.  Iron ore prices are now below $70 per ton giving mills much more room to compete with each other on pricing.  With demand from China slowing and Europe remaining stagnant, all eyes are on the U.S.  While U.S. demand has remained quite strong relative to the rest of the world, the global slowdown is a lingering concern for U.S. companies.  Negative economic data out of the U.S. could send prices even lower as mills compete for business into 2015. 

Volume was very low last week due to the Thanksgiving holiday.  It has picked up slightly with over 4,000 tons trading so far this week.

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

After trading lower to $350/ton last month, scrap prices are likely to be flat to down $5-10 per ton this month.  The lack of price support is largely due to fewer exports due to the slowing global economy, which has increased the domestic supply

Below is another interactive graphic, but for the latest busheling scrap forward curve in comparison to the same curve from four weeks ago.

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

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