Hot Rolled Futures: Thin Trading Due to Holiday Week

Written by Jack Marshall

The following article on the hot rolled coil (HRC) and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

Steel Futures

HR futures have been quiet going into the holiday week as reflected both in the curve values and in the spot market.

Futures volumes for the past week have been mainly in the early 2017 periods with 10,120 ST trading. The bulk of the deals going through have been calendar spreads with steep backwardated transaction prices. Q1’17 HR traded @ $626/ST and Q2’17 HR traded @$600/ST. The trade prices reflect a very bearish view between Q1’17 and Q2’17.

Bids have been thin of late but perhaps another price hike will bring them back. The question is how long will this supply constrained push higher last given some near term demand concerns on the horizon.  

Market participants are waiting for the next mill price increase announcement which has been bolstered by early market chatter that BUS prices will  increase $40/$50 per GT and the fact that the mills have basically captured their last price increase.

HR indicative curve

Spot $599
Q1’17 $630
Q2’17 $610
Q3’17 $605
Q4’17 $603

Wishing you & yours all the best for 2017!

Below are two graphs showing the history of the hot rolled and busheling scrap futures forward curves. You will need to view the graphs on our website to use their interactive features, you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.

Jakc Marshall, SMU Contrubutor

Jack Marshall

Read more from Jack Marshall

Latest in Futures

HRC futures: ‘Normalcy’ not seen on near-term horizon

Over my years of observing the steel market, there's been a recurring belief that current market disruptions in either the physical spot market or steel futures are temporary anomalies, destined to fade, and that normalcy will soon return. However, the events of the first few weeks of 2024 served as a stark reminder that this expectation seldom materializes, and that the US steel market is still the most volatile steel market in the world.

HRC futures: Understanding and addressing HRC basis risk

It’s no secret that HRC futures have been particularly volatile over the past several years. The most recent instance was the outsized break in the March futures contract early this week. For companies procuring raw material in anticipation of higher prices or even to get ahead on future purchase orders from customers, understanding the relative price of that raw material versus the hot-rolled coil futures curve is important.

HRC futures: A flock of canaries in the mine

Much has happened since we last met on Jan. 4. Cleveland-Cliffs announced a price increase on Jan. 3, lifting the futures market in the morning only for it to finish the day $20-$30 per short ton (st) below those morning highs. On Jan. 4, the futures curve was down another $10-$28/st. And in my column for SMU that evening, I asked a question: Would those aggressive sellers be met with a short-squeeze forcing them to cover, or had the market peaked with the negative price action to start the year the proverbial canary in the coal mine?