Futures
Hot Rolled Futures: Strong Near-Term Price Reversal in HR; How Long Will it Last?
Written by Jack Marshall
March 3, 2022
The following article on the hot rolled coil (HRC), scrap and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:
Hot Rolled
In spite of a large drop in the HR index this past week (sub $950/ST), the forward curve in HR continued to spike higher on the Russia invasion of Ukraine. As of yesterday’s close, both Q2’22 and Q3’22 HR average prices were up over $310/ST since settlements at the beginning of February 2022. Yesterday’s average price Q2’22 settlement was $1,278/ST and average price Q3’22 settlement was $1,250/ST.
Recent price increases announced by various steel mills have added to the price uncertainty as folks try to gauge the availability of future spot tons due to the global ferrous supply disruptions resulting from the war. For those who missed selling HR initially on the price move down, this interruption has given them another opportunity to sell at much better levels than early February. Recent HR futures activity suggests the market expects elevated prices to remain through Q2’22 based on recent Calendar spreads in Q2’22 versus further out quarters
Below is a graph showing the history of the CME Group hot rolled futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact us at info@SteelMarketUpdate.com.
Scrap
The war news has affected BUS prices due to expectations of a supply pinch in metallics cargoes coming out of the Black Sea. U.S. export scrap prices are expected to be $50-$70/ ton higher.
Beginning of February 2H’22 BUS settles were at $535/GT and traded yesterday at $655/GT, up $120/GT in just one month. The uncertainty regarding the war’s outcome has boosted nearby BUS months even more as mid $700 prices are trading in May’22. The talk was of up $60-80/GT for March BUS, but some have even suggested higher. Today the Mar’22 BUS traded as high as $615/GT, which signals up $95/GT.
Below is another graph showing the history of the CME Group busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here.
Jack Marshall
Read more from Jack MarshallLatest in Futures
HR futures: Shifting risk profiles, emerging opportunities
Summer is here, and a familiar sentiment has hit the hot-rolled coil (HRC) futures market. Prices continue to decline in both the spot market and the futures market, with expectations of sub-$800 prices for the remainder of the year.
HR futures complex slips from June
The CME steel futures complex saw a slight decrease in activity from levels seen at the end of June. This has coincided with a notable decline in flat prices for the nearby futures contract, now August HRC, which is lower by $81 per short ton (st) since last writing on June 13. It settled at $672/st on July 17.
HR futures: Bottom to prices?
A month ago, when we last presented this column, there was a surprising amount of optimism in the presumably imminent reversal of the downtrend in hot-rolled steel prices in the second half of this year.
HR futures: ‘Gimme Shelter’
This chart of the rolling second-month CME hot-rolled coil (HRC) future dating back to the start of 2022 has been as volatile as a herd of “Wild Horses.”
HR futures: Market changes gears
For the first time in weeks, activity in the futures market broke out of the recent “front grinds lower” pattern to provide new insight into the dynamics of the steel industry.