Hot Rolled Futures: Prices Move Higher But With Less Velocity 

In spite of the rapidly spreading Covid virus and some market concern about its potential impact on manufacturing operations, not much has changed since my last piece on HR with respect to market conditions. Tight market supplies persist. The battle of supply and inventory continues.

HR spot and futures prices continue steadily moving higher, but the velocity of the upward price move has declined compared to the prior two months.

Spot has risen from just shy of $700/ST to roughly $720/ST since just before the U.S. election, compared to about $100/ST per month prior.

The CME HR Index average, month on not quite complete month, is up roughly $63/ST ($645 vs. $708). 

The futures curve prices have shifted up, but most of the move has been in the Q1’21 quarter, which is up about $80/ST as compared to Nov. 2. Q2’21 HR futures prices have risen below $70/ST and Q3’21 HR futures prices have risen about $34/ST. Q4’21 HR futures prices are up less than $10/ST.

As of yesterday’s close, Q1’21 HR futures were valued near $740/ST, Q2’21 HR futures were valued near $696/ST, Q3’21 HR futures were valued at $642/ST, and Q4’21 HR futures were valued at just over $598/ST.  

November has witnessed a greater backwardation in the futures curve with the greater rise in the near dates and the lesser rise in the further out dates. In Cal’21, the spread between Jan’21 and Dec’21 HR futures has increased by $78/ST (Nov. 2: $680/$585; Nov 18: $758/$585).

HR trading volume remains robust with 218,120 ST futures traded so far in November, while Open Interest is at 459,300 ST.

Scrap

BUS futures prices, which had been fairly well anchored for the last few months even as HR futures rose, finally saw some upward price movement. BUS spot settlement for November ($299.73) picked up over $10/GT versus the prior month’s settlement even as the market was looking for a strong sideways value. The late BUS spot buying, which pushed price expectations higher, has continued. The Dec’20 BUS futures are now hovering around $340-$345/GT and the futures months are now trading at a premium to the Dec’20 BUS. Q1’21 BUS traded at $357/GT today, which is a $26/GT pickup from the Nov. 2 Q1’21 settlement of just under $332/GT. The BUS futures curve remains relatively flat with the Cal’21 months up roughly $25/GT since the beginning of the month. Inquiries for BUS have started to push further out the forward curve, however the bulk of the interest remains in the front two quarters.

Recent metal margin interest (HR-BUS) of note Feb-Mar’21 traded at $380/t and Q2’21 MM indicated offers are coming in around $350ish.