Hot Rolled Futures: A Turn?

We are last 2118 on the June futures on S+P, just below all-time highs and about to test them. We have actually broken the support line I was referring to earlier and dropped to 2062 area and since rallied, now about to test the old highs. We’ve been tracking sideways for a bit and charts suggest a big breakout to the upside toward 2250. The S+P index has already set new highs today so a little surprising the active month futures month hasn’t already done so as well. Would think a formality at this point.

Steel:

We did a modest 810 lots this week or 16,200 ST. The Cal ’16 level came off to $540 from $547 last traded while the nearby periods of Q3 and Q4 rose to $515 and $520 respectively. So the result was a flattening of the forward curve, which had been getting attention for its steep contangos. The CRU came in yesterday @ $451/ST or up $8/ST from the week prior. Did I say “up”? Holy crap. I did. Well bring it on. Some mills do have July lead time already, but not all. As inventories continue to adjust down and the imports continue to wane further upward pressure is in store. Trade case fodder as much as it is “blah blah blah blah blah” is still a major risk for real upside movement.

Below is an interactive graph of the HRC Futures Forward Curve. The graph can only be seen when reading this article while logged into our Steel Market Update website:

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

Iron Ore:

We are in Iron Ore Week in Singapore. The market appears to have peaked at $62/MT area and failed, at least for now. The western world traders and CP’s appear bearish and the Chinese CP’s appear bullish due to government actions to stimulate. The Chinese Cp’s are wrong, but be careful, they were wrong also on real estate too and that rally went on for 3 years longer than anyone thought – remember our tech bubble in the 2002 era. Like a dog on bone, could go irrational a lot longer and lot farther than expected. If the Chinese are determined to buy it, the western world traders have no chance to prevail, and the fact that they’re short makes them a real target to be run in but these most formidable speculators. This chapter is not done yet. We’ll see where market moves post conference week. Let’s call June either side of $57.25, July either side of $56/MT, Q3 either side of $55.00/MT, Q4 either side of $53.00/MT and Cal ’16 either side of $51.75/MT.

Scrap:

It didn’t go up in May, sideways actually $243-4 ish. However, we are talking the weakest market domestically, that of MW Busheling. The rest of the balance of the country went up slightly depending on grade and period. Mills inventories aren’t great and some are getting orders and now out to July lead times. It wouldn’t surprise me to see some mid-month buying to fill in. I think we’re up in June. Cap on the enthusiasm is the fact that Nucor DRI facility is back up and running and won’t be looking for Bush unless orders improve a lot. That said, the foreign mrkts. are stronger with CFR Turkey trading close to $290/MT. Domestic mrkt. there has improved a touch on tight supply for scrap. Market driver is still higher for scrap regardless, we’re just too cheap to attract collection. Also careful if prime grades start to wane here as manufacturing activity cools. This will be a floor on steel prices…

Another one of our interactive graphs is below with the BUS (CME Busheling Scrap) forward curve.

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