Product
April 23, 2020
Hot Rolled Futures: CME HRC and Busheling Futures Remain Optimistic of V-Shaped Recovery
Written by David Feldstein
SMU Contributor David Feldstein is president of Rock Trading Advisors (davidfeldstein@rocktradingadvisors.com). In addition to market analysis, RTA provides price risk management not only for ferrous products, but also base metals, energy and interest rates. RTA also trains sales staff and creates the infrastructure necessary for firms to offer their customers fixed pricing on physical sales.
Current market expectations extrapolated from the CME Midwest HRC futures curve indicate a sharp V-shaped recovery. May and June futures have been trading around $470 this week. The curve currently has hot rolled bottoming in June and then rebounding back to $500 in August and back towards $540 in the months that follow. Central to these expectations is a sharp snapback in demand, one that gets ahead of the unprecedented, abrupt and aggressive supply cuts taken by numerous mills to idle capacity resulting in a tight market. A long-term cumulative decrease in imports and rationalization of service center flat rolled inventory leaves the industry in a relatively healthy position to weather this 100-year storm. Therefore, the key to all of this lies in the timing and strength in demand once the economy returns.
