Prices
August 2, 2018
HRC Futures: Complex Choices
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.
The CME HRC futures curve continues to be backwardated (downward sloping), which has presented a complex set of choices for market participants with opposing commercial needs. OEM’s/steel buyers’ reluctance to hedge last fall when HRC futures were trading in the low $600s has seemed to persist all year with the majority of participants expecting an imminent sharp price correction for months now. The downward sloping curve is one piece of evidence of this reluctance. Others include the super-low ISM customer inventory subindex, the falling MSCI flat rolled inventory level and durable goods data. Also, comments and earnings announcements from publicly traded manufacturing firms have indicated the group has borne the brunt of the price rally.
