Hot Rolled Futures: Putin Throws a Monkey Wrench Into the Ferrous Machine

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 tragic events in Europe have been horrific to watch, and the loss of life and needless destruction of property have resulted in dramatic changes in many people’s lives, and in commodity markets as well. Commodity prices are set by supply and demand, just like everything else, and the lack of some commodity flows out of Russia and Ukraine have had a profound impact on many markets. We thought we would look at some of the curves from a pre-war and current perspective, and see if we can make any sense out of the movements. The upward surge in the US HRC curve and spot prices on physical steel has been remarkable. As the world tried to calibrate just how important exports of semi-finished and finished steel were from those two countries, the forward curve lurched higher. Putin, in a sense, threw a “monkey wrench” into the global ferrous supply chain, and the US was not immune to this.