HRC and Bush Futures: Sleepy Summer Market Continues

Volatility in HRC futures has cratered along with trading volume, which, after briefly picking up in mid-June, has fallen to a five-day average of 13,448 tons as of yesterday’s close.

Open interest has flattened out around 530,000 tons since peaking just above 900,000 tons in January. Open interest is the number of outstanding futures contracts, or tons in this case.

The rolling 2^nd month CME future, now August, broke below February’s $955 per ton low on June 16 and has continued lower since.

Taking a closer look at the chart, you will see the August future is currently touching the down trendline that started back in early April. Will the August future continue to decline or will it start to peek above its downtrend? 

Fears of supply disruptions resulting from Russia’s full-scale invasion of Ukraine in February sent busheling futures prices briefly above $900 per long ton in March. Any disruption to busheling supply has since been resolved sending the month’s settlement sharply lower. The April busheling future settled at $778.65/long ton, the highest settlement on record, but well below $900/long ton. Earlier this week, the July future settled down $133.92/long ton MoM at $500.86/long ton with the August future pricing in another decline to come trading at $475/long ton, the lowest level since January 2021. Volume has fallen sharply as well with trading coming in fits and spurts, or as they say in the business “trading by appointment.” The five-day average daily volume has been oscillating between 1,000 to 2,500 tons per day in July.

Open interest across the busheling curve has also fallen following July’s expiration to 104,000 long tons, its lowest level post expiration since last December.

Since June 23, the busheling futures curve has seen little movement with no future up or down by more than $22 per long ton through next June.

Now seems like a great time to work on your tan, spend some time with the family or go to Europe and see Big Ben. Just keep one eye on the market of course as these ultra-low levels of volume and open interest mean relatively illiquidity and an environment that can quickly turn a sleepy summer market into a rip-roaring one in no time.

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