Hot Rolled Futures: "The Show Goes On"

Rolling 2nd Month CME Midwest HRC Futures

Today on CNBC, Joe Terranova let the world know he’s reading the Steel Market Update. 

If you hadn’t bought the dip by June 2nd, however, well…

You missed the boat.

Buckle your chinstraps folks because the CME Midwest HRC futures curve has ripped $40-$45/st higher since last we met. In the chart below, the blue line is the CME HRC Midwest futures settlement prices on June 1st, the green line is the futures settlement prices on June 14th and the red line represents today’s trades with August trading as high as $618/st.

HRC futures were probably bid up today due to bullish May flat rolled shipping and inventory data released by the MSCI this morning with MOH down to 1.92.

May MSCI Service Center Flat Rolled Inventory (white) & MOH (Red)

In addition to the strong fundamental data, the asymetric upside risk tied to potential government policy resulting from the Section 232 Investigation could send HRC prices much higher. This risk has been well known and publicized, however another upside risk is emerging. 

Logistical tightness is occuring in not only the railcar, but also in the flatbed trucking market. The chart above right shows a sharp YoY rise in DAT.com’s “Flatbed Load-to-Truck Ratio.” If this tightness persists or escalates, it could affect availability and lead times.  This in turn could force service centers and OEMs to increase their on-hand inventory levels from record lows. A forced restocking coinciding with government intervention? Asymetric risk doesn’t get much more palapable than that!

The opportunity might present itself in HRC futures at any time, so pay close attention to President Trump’s tweets, keep your local broker on speed dial and remember Ferrous Bueller’s philosophy…

“Life moves pretty fast.  If you don’t stop and take a look around once in a while, you could miss it.” –