Johnson: Last Week in HRC Futures

We are excited to talk about the week that was in US hot-rolled coil (HRC) futures. Before we dive in too deeply into specifics, though, let’s touch on a data point we haven’t talked about extensively in recent reports: volume and open interest. Hard to believe, but about a decade ago the most prominent complaint among prospective clients of ours who might trade in HRC futures was something along the lines of, “We would, but there is not enough liquidity.” Fortunately for the steel industry, it has become increasingly difficult to use this as a justification for non-participation in the financial derivatives markets just about every year for the last seven years.

Indeed, 2022 marked another year of increased volumes, with 260,885 lots of HRC traded in the calendar year on the Comex exchange (just over 5.2 million short tons). No doubt that is still a small piece of the overall production pie in the US. But it is conceivable that within 5-10 years of steady growth, US futures volumes could match or exceed domestic HRC production volumes, which should be the natural target for growth. While this figure does not include OTC volumes or other exchange products in the same category, it is still a significant metric to keep an eye on.