Hot Rolled Steel and Scrap Futures

Written by Jack Marshall

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:


Shifting sentiment in HR futures this week. Indexes bounced back up after falling the previous week. Tariffs kick in beginning in May for those countries unable to negotiate reduced tariffs on steel. Higher mill prices being pushed ($900/ST) in the last week have helped HR futures prices bounce higher as compared to last week all along the balance of calendar 2018. However, we have experienced steeper backwardation of the futures curve as it pushes the peak levels closer to cash. In the last week, significant moves in the May’18 versus Q3’18, as well as the Jun’18 versus Q3’18, highlight the steepening futures curve. For example, last Thursday, May versus Q3’18 was valued at $61/ST back ($830, $769) and today the spread traded for 12,000 ST at $75/ST back ($860, $785) reflecting higher prices but a steeper backwardation as the time spread widened by $14/ST.  

On Tuesday, the Jun’18 versus Q3’18 time spread traded at $50 back ($825, $775) in 15,000 ST, which was $19 wider than where it was valued the previous Thursday ($800, $769).

With large time spreads trading this week, HR futures volumes are very healthy with almost 124,000 ST trading between last Thursday and today. Open Interest in HR futures is just over 257,000 ST.


In Scrap futures, the BUS (U.S. Midwest prime) has basically been hovering in the $370/$380 per GT range for the balance of 2018. Today, May’18 and Q3’18 traded at $380/GT and the Q3’18 metal margin traded at $400 per ton  ($780/ST HR and $380/GT BUS and $785/ST HR and $385/GT BUS).  

The 80/20 futures SC have been mixed with the curve softening at the end of last week and the beginning of this week only to recover, leaving the curves basically unchanged to slightly stronger from a week ago. Seems a few cargoes traded at higher prices giving the futures a boost after a few low-priced cargoes. May SC is trading near $350/MT in the near dates with slight backwardation out six months.

The U.S. Midwest Shred USSQ has remained fairly flat. With the near dates $360/$370 per GT and the 2H’18 at $353/$365 per GT.

Jakc Marshall, SMU Contrubutor

Jack Marshall

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