Hot Rolled Futures: Activity Picking Up

SMU contributor Gaurav Chhibbar is a partner at Metal Edge Partners, a firm engaged in Risk Management and Strategic Advisory. In this role, he and his firm design and execute risk management strategies for clients along with providing process and analytical support. In Gaurav’s previous role, he was a trader at Cargill spending time in Metal and Freight markets in Singapore before moving to the U.S. You can learn more about Metal Edge at www.metaledgepartners.com. Gaurav can be reached at gaurav@metaledgepartners.com for queries/comments/questions.

U.S. HRC futures are seeing some renewed buying interest. With the front of the curve falling from ~$540 to below $500, there is some level of short covering and index-deal locking that is driving the buying activity. In addition, with the curve steepening over the course of the last few days, there are opportunities for discount physical steel buyers to lay off some of that risk by selling the deferred months. While nearby fundamentals continue to be weak—short lead times, weak order books, buyers’ reticence to book tonnage—the market seems to be pricing an improvement in conditions further out into Q4 or early Q1. December futures are about $10 higher than Nov’19, while January is about $25 higher.