Hot Rolled Futures: Prices Begin to Push Higher

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.