Futures
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/media/k2/items/src/3dafedc5587d326b12c590ed5a04b5f9.jpg)
Hot Rolled Futures: Unclear Market Sentiment Leaves Conviction on Price Direction Muted
Written by Jack Marshall
November 7, 2019
The following article on the hot rolled coil (HRC) steel and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:
Steel
HR futures markets have been range-trading the last few weeks as participants have been focusing on what appears to be a technical near-term bottom. Volumes have been somewhat uneven, even as we have seen some longer-term end-users coming into the HR futures markets to buy and lock in financial hedges against some of their exposures.
On the other hand, there has been steady interest to offer the latter half of Cal’20 and the 1H’21, which has kept the slope of the forward curve relatively contained even as they periodically get paid. We saw $580/ST trade in Jan’21 to Sep’21 HR last week as part of a metal margin spread. In Cal’20, the HR futures for market Q1’20 has been actively pinned to the $550 to $555/ST level recently, and the Q2’20 HR and Q3’20 HR have been trading in the $560-$565 area.
The latest index values for HR physical are fairly wide as they range from $460 to $500/ST depending on the index. Even with the latest mill price announcement, some squaring up of physical positions going into yearend might account for the lagging rise in prices. The markets will be very focused on the upcoming weekly print for further clues as to price. There has been some anticipation of a pickup in spot prices as the market waits for all mill deliveries to fully cross over into January 2020.
While the HR futures curve prices have risen about $20/ST when compared to Oct. 1 settles for the Cal’20 period, we have seen the slope of the HR forward curve start to push higher in the last month or so only to retrace. For comparison of settles in HR: Back on Oct. 1, the Jan’20 HR versus Dec’20 HR was $530/ST versus $540/ST, a $10 contango. As of Nov. 6, Jan’20 HR settle was $547/ST versus Dec’20 HR settle at $570/ST, a $23 contango. However, today we are again seeing some compression in the slope of the futures curve as Q1’20 HR traded $555/ST versus Q4’20 HR, which traded at $560/ST (only a $5 contango for the beginning and ending quarters of ’20 as compared to Oct. 1 settles of $532/ST Q1’20 versus $540/ST Q4’20, or an $8 contango).
This market will be focusing on whether another announcement of a mill price increase in HR will be enough to offset concerns that current demand is still underperforming available supply.
Below is a graph showing the history of the CME Group hot rolled futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact us at info@SteelMarketUpdate.com.
Scrap
Some tightness in East Coast scrap export markets with 80/20 trading around $260/GT has helped give rise to Midwest BUS prices. Early prices for Detroit suggest up $20/GT for November’20, which could see Midwest BUS up at least $15/GT. Recent interest in 1H’20 BUS futures has helped push prices up to $275/GT. Last week a metal margin trade spanning Jan’21 to Sep’21 saw BUS trade at $290/GT. Trading in Dec’19 BUS has been limited as Dec’19 bid offer spreads have been wide ($235/$255). Steep contango in BUS futures curve.
Below is another graph showing the history of the CME Group busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here.
We have started tracking USSQ shredded scrap futures, shown below. Once we have built a sizable database, we will add this data to our website.
![Jakc Marshall, SMU Contrubutor](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/04/jack-marshall-150x150.jpeg)
Jack Marshall
Read more from Jack MarshallLatest in Futures
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures: Shifting risk profiles, emerging opportunities
Summer is here, and a familiar sentiment has hit the hot-rolled coil (HRC) futures market. Prices continue to decline in both the spot market and the futures market, with expectations of sub-$800 prices for the remainder of the year.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures complex slips from June
The CME steel futures complex saw a slight decrease in activity from levels seen at the end of June. This has coincided with a notable decline in flat prices for the nearby futures contract, now August HRC, which is lower by $81 per short ton (st) since last writing on June 13. It settled at $672/st on July 17.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures: Bottom to prices?
A month ago, when we last presented this column, there was a surprising amount of optimism in the presumably imminent reversal of the downtrend in hot-rolled steel prices in the second half of this year.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures: ‘Gimme Shelter’
This chart of the rolling second-month CME hot-rolled coil (HRC) future dating back to the start of 2022 has been as volatile as a herd of “Wild Horses.”
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures: Market changes gears
For the first time in weeks, activity in the futures market broke out of the recent “front grinds lower” pattern to provide new insight into the dynamics of the steel industry.