HRC Futures: Breaking Down Further to $600 After Mnuchin’s Tariff Removal Comments

The following article discussing the global ferrous derivatives markets was written by David Feldstein. As an independent steel market analyst, advisor and trader, we believe he provides insightful commentary and trading ideas to our readers. 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.

Near-term CME HRC futures continue to fall, dropping over $25 since May 2. Today, the June and July futures traded as low as $600 and are approaching the $585 support level indicated by the bottom yellow dashed horizontal line.  If support in the $575-585 area fails, prices could be heading to $500.  When prices broke through the $680 support level, the idea that the HRC price would need to make a sharp price move lower to a point that induces buyers to step in was expressed (see April 11 SMU).  Since then, prices have fallen $80 in five short weeks, but that doesn’t seem to be enough? In fact, sentiment has rapidly deteriorated during that period.