Futures
Hot Rolled Futures Move $3 to $7 Higher in Past Week
Written by David Feldstein
July 21, 2016
The following article on the hot rolled coil (HRC), busheling scrap (BUS), and financial futures markets was written by Dave Feldstein. As Flack Steel’s director of risk management, Dave is an active participant in the hot rolled coil (HRC) futures market and we believe he will provide insightful commentary and trading ideas to our readers. Besides writing Futures articles for Steel Market Update, Dave produces articles that our readers may find interesting under the heading “The Feldstein” on the Flack Steel website www.FlackSteel.com.
CME HRC futures have moved up between $3 and $7 in the past week. The CME HRC futures curve remains steeply backwardated, but as physical prices remain in the $620 – $630 level, futures prices are increasing as they are literally being pulled up the curve with every passing day. Considering August’s first print is less than two weeks from today, prices would have to fall around 5 percent to reach last night’s settlement at $593.
A total of 22,260 short tons traded last week with the main focus on the first half of 2017. Currently, open interest stands at 391,360 st.
Steel stocks have rallied dramatically in the past few weeks. Considering the forward curves steep backwardation, it’s been interesting to watch the steel stocks run higher. The chart below shows the YTD percentage return for the TSI Daily Midwest HRC Index, July 16, Nov. 16 and Feb. 2017 CME HRC futures and a sample of steel stocks. Are the steel stocks overvalued or are futures undervalued?
The five domestic publicly traded steel mills have seen their market capitalization increase by almost $16 BILLION dollars in 2016. How much leverage does this provide the mills with, to forego tons to keep prices at current levels?
David Feldstein
Read more from David FeldsteinLatest in Futures
HR Futures: Low-key market despite Trump tariffs
Despite the hand-wringing and head-scratching about the impact of President Trump’s tariff policy, the HRC futures market has been relatively subdued since our last writing of this article.
HR Futures: Nascent rally in HRC futures settles above 6-week downtrend
The CME Midwest HRC futures market’s response to Trump’s election and subsequent comments about blanket 25% tariffs on Canada and Mexico was surprisingly counterintuitive.
HR Futures: Market at crossroads after turbulent run
The market appears to be pausing after a turbulent run. But tension remains just beneath the surface. With net long positioning still elevated, sentiment-driven selling could quickly reignite volatility. Still, supply constraints and limited imports are laying the groundwork for a resilient physical market. This moment of calm feels more like a crossroads than a conclusion.
HR Futures: Traders’ views mixed as market navigates tariffs
A look at the HR futures market.
Market pressures trigger HR futures reversal
Market dynamics are shifting rapidly, with futures pricing diverging from physical fundamentals, creating a complex landscape for steel traders.