Mexico
May 17, 2018
HRC Futures: The Steel Shortage Is Coming!
Written by David Feldstein
The following article on the hot rolled coil (HRC) futures market was written by David Feldstein. As the Flack Global Metals Director of Risk Management, Dave is an active participant in the hot rolled futures market, and we believe he provides 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 Global Metals website, www.FlackGlobalMetals.com. Note that Steel Market Update does not take any positions on HRC or scrap trading, and any recommendations made by David Feldstein are his opinions and not those of SMU. We recommend that anyone interested in trading steel futures enlist the help of a licensed broker or bank.
Do you remember 2014? In the first quarter, HRC prices fell from $680 to $630 until a number of domestic supply disruptions shook the market. First, in late February, a breakout incident at AK Steel Ashland resulted in an unplanned outage. Then in late March, a collector main pipe collapsed on the roof at U.S. Steel Great Lakes resulting in an unplanned outage. Last, the winter of 2014 was so harsh and so long that the Coast Guard ice cutters couldn’t safely clear a lane for the ore boats out of Lake Superior because the ice quickly refroze. This resulted in anemic ore inventory levels at Midwest mills, which sharply extended lead times overnight and slowed production. These incidents resulted in HRC prices rocketing higher with the TSI Daily index peaking at $700 in early May. This opened up an attractive import differential and imported steel began flooding U.S. shores starting in May and continuing all year. Despite the flood of imports, the lagged effect of these disruptions kept prices relatively elevated until Thanksgiving.
