Hot Rolled Futures: Another Step Down for HRC Prices

Steel prices continued their slide this week. The CRU was down $14 to $488/ton, which has put downward pressure on futures contracts for nearby months.  April and May are trading approximately $10 lower this week with the former at $495/ton and the latter closer to $510/ton.  While nearby months have been influenced by the deteriorating spot price, the second half of the forward curve remains much firmer.  Q3 has trades being done around $525-$530/ton, and Q4 recently traded as high as $540/ton.

A bottom has yet to be reached for the steel market as slowing demand in China has hurt a vast amount of commodity prices including iron ore and coking coal.  Environmental regulations placed on Chinese steel mills as well as slowing construction in the country have both had a large impact on global demand for iron ore, which is currently at $57/MT.  Coking coal has seen a 12 percent slide in prices from this time last year; while not as dramatic as the fall in iron ore prices, this has allowed domestic mills to negotiate contracts well under $500/ton.  The bottom of the market remains to be seen, but it gets closer each week as U.S. steel prices become more aligned with the global market.