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    July 9, 2015

    Futures Markets Shrug off USS Price Increase Announcement

    Written by Spencer Johnson

    The following article is written by Spencer Johnson of FC Stone LLC. With six years of experience, Spencer provides his customers strategic and tactical advice on protecting themselves against commodity price volatility in the steel markets. Spencer will rotate weekly futures articles with Andre Marshall of Crunch Risk, LLC. Spencer can be reached at spencer.johnson@intlfcstone.com.

    As is so often the case, US Steel has chosen a particularly interesting time to begin a push for their $40/ton price increase on all flat-rolled products, and that’s without even diving too deep into the fact that a looming Grexit is stoking fears of an economic contagion in Europe. You know it is not a good sign when a huge financial crisis potentially looming in Europe doesn’t even make our top 3 reasons to be skeptical of pushes for higher steel prices. Granted, spot prices have stagnated around the $460/ton mark and mills would no doubt like to see a little rally, but the fundamental story behind this increase is weak, which is likely why no rationale was given by USS in their original increase letters that we have seen. Those letters, which came on Tuesday, had been more than welcome on the part of the bulls but we see the deck being stacked against the US mills on this issue for three reasons. Note that we do believe prices will indeed get a $40/ton boost, we just don’t see this happening in the short-term but instead as part of a long slog that will likely get us there sometime in the fourth quarter (in short, we are in agreement with the NYMEX HRC contango levels as being a fair estimate, more on that below).

    Spencer Johnson

    A broker at FCStone LLC, Johnson is a veteran in the world of steel futures. He has worked with every type of market participant to formulate risk management and trading strategies for steel derivatives. StoneX has also worked tirelessly to grow liquidity and provide access to new ferrous markets for its clients. Johnson is in addition one of the longest serving members of the London Metal Exchange’s steel committee.

    Read more from Spencer Johnson

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