Hot Rolled Futures: Steel Futures Stalling?

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.

The steel markets have seen some lack of belief show up in the past few days. The best term to describe it is one that I borrow from a friend—stalling. The green line (curve as of 12/5) has pushed lower towards the orange line (12/18 curve). This recalibration of expectations is an outcome of a lower than expected pace of increases in the HRC index, as well as confusion around actual HRC lead times. As buyers of physical steel report a mix bag of availability of HRC from mills, paper traders adjusted their price targets lower. Despite positive bias to raw material pricing and weaker import pressures, the front of the curve finds it hard to break and stay above $600.