Futures
Hot Rolled Futures: Futures Curve Remains Backwardated
Written by Jack Marshall
March 16, 2017
The following article on the hot rolled coil (HRC) steel and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:
Steel
HR futures trading has been very muted this week as only 5,300 ST of futures traded since the latest round of mill price increase announcements and rising scrap prices. This past week the focus has been on balance of 2017 with Q3’17 the most active. The futures curve remains well backwardated. May’17 traded @ $648/ST and $647/ST and Q3’17 has traded at a weighted average of $609/ST. Note the May to July discount of just under $40/ST.
There has been good two way futures interest but buyers are cautiously bidding well below current settlement values and sellers are offering slightly closer to the curve values on the topside. Sellers have not been reaching in this market. Market sentiment is clear as mud. Various reported HR spot transactions did not provide a very strong directional signal this week. However, prices continue to edge higher as concern over supply constraints remain.
The current offer in the balance of 2017 stands around $621/ST average ($650/ST offer Q2’17, $612/ST offer Q3’17 and $602/ST offer Q4’17)
Below is a graph showing the history of the hot rolled futures forward curve. You will need to view the graph on our website to use its 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.
Scrap
Latest has bulk cargo trading in Europe at over $303/MT 80/20 CFR T. Recent established range in LME scrap has been steady just above $300. The latest unrest in the Ukraine has the potential to further constrain supplies of pig iron and shift demand further to CFR T scrap. Near date LME scrap prices have edged higher as offers backed up on the Ukraine news. Improving weather in Europe could spur addition demand from Turkey.
LME scrap snapshot – $/MT
$303/$313 Apr’17
$293.5 traded May’17
$285/$296 Jun’17
Constrained supplies and additional demand for domestic primes (BUS) helped push prices up over $60/GT from last month. Early indications suggest prices may hold up going into April due to winter weather. Question everyone asking is how long can scrap prices remain at the current elevated levels due to supply constraints and increased demand. Current BUS offers indicate there is some concern it might take a while before prices retreat.
BUS scrap snapshot – $/GT
$320/$350 Q2’17
$300/$325 2H’17
$295/$315 Cal’18
Below is another graph showing the history of the busheling scrap futures forward curve. You will need to view the graph on our website to use its 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.
Jack Marshall
Read more from Jack MarshallLatest in Futures
HR futures: Grinding lower while grinding to a halt
The last time we were together on April 18, the June hot-rolled coil (HRC) future was sitting around the $800 support level where the May future found a bottom in mid-February.
HR futures: Nucor’s price cut makes its mark on steel markets
When we were asked to provide some additional commentary to SMU about the futures markets for flat rolled, our only reluctance to contribute was rooted merely in the fact that SMU (1) already offers an excellent array of authors on this topic and (2) a concern regarding what new ground could be covered that hasn’t already been discussed to death on this issue. Thankfully, however, Nucor has offered up something we can describe, without hyperbole, as simply revolutionary for spot pricing in flat rolled - a development that we simply could not resist commenting on with respect to its probable impacts on the futures market.
HRC futures: Still waiting for clarity
“One thing we know for certain, however, is that when we write our next column, things will have certainly shaken loose.” – Daniel Doderer, April 4, 2024. Above is a good reminder that whenever someone is “certain” of anything, you should probably look at that line of thinking with a healthy dose of skepticism.
HR futures: Activity muted amid quiet spot market
Week-over-week trading activity in US steel derivatives markets was relatively muted, with prices maintaining their downward direction since the beginning of the month. Bids have materialized at the lower end of this range in the May, as the nearby backwardation continues to roll on - just as we saw with April being a premium over May.
HRC futures: Consolidation ahead of a big move?
It has been a crazy 2024 so far for hot-rolled coil (HRC) futures!!!