Hot Rolled Futures: China—Redux

SMU contributor Tim Stevenson 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 Tim’s previous role, he was a Director at Cargill Risk Management, and prior to that led the derivative trading efforts within the North American Cargill Metals business. You can learn more about Metal Edge at www.metaledgepartners.com. Tim can be reached at Tim@metaledgepartners.com for queries/comments/questions.

The Chinese steel market has changed rather dramatically over the past few weeks. Looking back to early March, inventories of HRC and rebar were increasing, as they do normally at this time of year. The China PMI had been trending lower and was barely over 50. Steel prices had been consolidating. Note on the below HRC chart that since December, steel prices in China were stuck in a channel just under $700 (green support line) and maybe $775 on the high side (red resistance line). Inventories peaked on March 4 and started moving lower. Recently, you can see that prices ripped up through resistance to make fresh highs for this cycle.