Futures
Hot Rolled Futures: Prices Begin to Push Higher
Written by Jack Marshall
August 27, 2020
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:
In the last month, HR spot prices have had a fairly wide range, trading at least a $40/ST range based on reported indexes. August HR spot settled at $451/ST. August, which can be a rather quiet month for futures hedging transactions, was very active due to the following factors—lead times lengthening, strengthening scrap prices and forecasts for improving prices and demand. This month, lead times pushed out over six weeks at a number of mills, improved demand for scrap pushed prices higher and offer inquiries for HR futures ticked up.
The HR futures market has been very active in both the nearby months and Q4’20 and Q1’21 periods. The volume of futures nearly tripled from July as almost 500,000 ST of steel futures traded, in part due to quite a few calendar spreads being transacted.
The futures curve reflected stronger demand for both Q4’20 and Q1’21, which steepened the contango. During this period, the HR futures curve prices have shifted higher. It is up about $15/ST for the two periods. From one month to 12 months out, the curve prices rise about $45/ST.
Scrap
Expectations for higher HR prices have been reflected in higher prices for BUS as reflected in BUS futures. The futures curve has risen almost $14/GT on average over the last month with Q4’20 BUS futures trading in the $310/GT range. There still exists a wide margin between the latest BUS settle at $258 and spot month futures. Early chatter has BUS futures prices climbing $10-30/GT. Export scrap demand does not show signs of weakening anytime soon, which will support higher BUS prices.
Jack Marshall
Read more from Jack MarshallLatest in Futures
HR Futures: Nascent rally in HRC futures settles above 6-week downtrend
The CME Midwest HRC futures market’s response to Trump’s election and subsequent comments about blanket 25% tariffs on Canada and Mexico was surprisingly counterintuitive.
HR Futures: Market at crossroads after turbulent run
The market appears to be pausing after a turbulent run. But tension remains just beneath the surface. With net long positioning still elevated, sentiment-driven selling could quickly reignite volatility. Still, supply constraints and limited imports are laying the groundwork for a resilient physical market. This moment of calm feels more like a crossroads than a conclusion.
HR Futures: Traders’ views mixed as market navigates tariffs
A look at the HR futures market.
Market pressures trigger HR futures reversal
Market dynamics are shifting rapidly, with futures pricing diverging from physical fundamentals, creating a complex landscape for steel traders.
HR Futures: Correction in market after big rally
Another eventful week in the physical and financial steel markets is coming to a close, but with a markedly different tone than the last update at the end of February.