Futures

Ferrous Futures Remain Strong

Written by David Feldstein

June 14, 2018

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.

CME Midwest HRC futures have been consolidating the sharp gains seen since the Trump administration’s announcement of removing tariff exclusions from Canada, Europe and Mexico on May 31 with July trading 500 tons at $923 earlier today.  Last week’s G-7 meeting presented an opportunity for some resolution and there were even headlines of a possible agreement between the U.S. and Canada late Friday, but those were quickly put to rest Saturday with President Trump’s early departure from the summit and comments reinforcing his commitment to his position on trade and steel tariffs.

July CME Midwest HRC Future

The front end of the CME Midwest HRC futures curve has seen little change since May 31, while Q4 and Q1 have moved $20-$25 lower. The downward sloping curve continues to maintain its shape with Q4 trading around $860/st and Q1 trading around $825. 

CME Midwest HRC Futures Curve

The July LME Turkish scrap future settled today at $353/mt up $0.50 since last Thursday.

2nd Month Rolling LME Turkish Scrap Future

The LME Turkish scrap futures curve (left) is downward sloping similar to the iron ore futures curve, while the CME busheling futures curve is mostly flat starting in July.

LME Turkish Scrap (left) & CME #1 Busheling (right) Futures Curves

The chart below shows the Chinese domestic HRC spot price breaking above the $667/mt resistance level.

China Domestic Spot HRC Price USD/mt

This is interesting as the Chinese HRC and Rebar futures traded on the Shanghai Futures Exchange continue to rally and are closing in on highs made three months ago.  It will be interesting to see how the U.S. flat rolled market reacts if Chinese finished steel prices and/or ferrous raw materials (coal, ore, scrap) start to rally materially. 

Shanghai Futures Exchange October HRC (red) & Rebar (white) Futures USD/mt

The 2nd month rolling SGX iron ore future remains in a tight range and holding the uptrend that started in early 2016 after ore bottomed just below $40/mt

2nd Month Rolling SGX Iron Ore Future

The front of the SGX iron ore futures curve has flattened dramatically over the past month. 

SGX Iron Ore Futures Curve

David Feldstein, SMU Contributor

David Feldstein

SMU Contributor David Feldstein is president of Rock Trading Advisors. David has over 20 years of financial market trading experience and has been active in the ferrous futures space since 2012. Feldstein earned an MBA from the University of Chicago Booth School of Business with concentrations in economics, statistics and analytical finance. He can be reached at davefeldstein@gmail.com.

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