Trade Cases

HR Futures: Signs of Softness, Maybe

Written by Jack Marshall

March 23, 2023

I referred to the fast-paced mill price increase announcements for HR back on March 9. The HR spot index had just moved up over $100 per short ton (ST) from the prior week to set the monthly contract price at $1,017/ST.

HR spot indexes have continued to move higher albeit at a slower pace.

Hot Rolled

The latest CRU post indicates spot prices of $1,129/ST. This represents a $112/ST increase from two weeks ago but is still $71/ST shy of mill target prices of $1200/ST.

This week it appears that the market participant sentiment has shifted, and the exuberance reflected in higher HR prices further out the forward curve has turned less bullish. While open interest has seen a healthy increase this month, futures curve prices have retreated significantly.

Open interest just since March 9 has risen by 3,620 contracts, or 72,400 ST, helping the overall open interest top 30,000 ST for the first time this year. Despite the additional market participation, recent transactions reflect a lack of confidence that mills will get all the latest announced price increases for HR.

The latest HR settlements for quarterly averages also reflect this retracement in prices. Q2’23 HR settlement from March 9 as compared to March 23 ($1268/ST versus $1127/ST) reflects a price decline of $141/ST. Q3’23 HR settlement from March 9 as compared to March 23 ($1063/ST versus $938/ST) reflects a price decline of $125/ST.

The latest selling could be short lived should mills announce further price increases and on extended delivery schedules just as they are entering a period of maintenance outages.

CME Futures 030923 Fig1

Scrap

BUS futures activity has been relatively quiet since March 9. With the exception of a few days, BUS volumes have been light. Open interest remains flat. Softer prices for recent export scrap cargoes have eased pricing pressures.

Recent chatter has April BUS sideways to up slightly from March settlement: $556 per gross ton (GT). The BUS curve settlement prices have recently retraced on average about $70-80/GT. The latest trade in Q3’23 BUS was at $500/GT.

CME Futures 030923 Fig2

Editor’s note: Want to learn more about steel futures? Registration is open for SMU’s Introduction to Steel Hedging: Managing Price Risk Workshop. One will be held on April 26 in Chicago and another on June 20 in Pittsburgh. Learn more and register here.

{loadposition reserved_message}

By Jack Marshall of Crunch Risk LLC

Jakc Marshall, SMU Contrubutor

Jack Marshall

Jack Marshall has over 30 years of experience trading and marketing financial futures and swaps, including currencies. Before joining Crunch Risk in 2012, Marshall was responsible for Forex Origination for BofA Merrill Lynch in their Chicago office. For Crunch Risk, he focuses on Ferrous scrap futures and helps manage client communications. Marshall is a regular contributor to the Steel Market Update newsletter covering topics including steel and steel scrap futures. He is NFA registered Associated Person and holds a Series 3 license. Marshall can be reached at jack.marshall@crunchrisk.com.

Read more from Jack Marshall

Latest in Trade Cases

Op-Ed: Strong trade enforcement builds prosperity and security

Tariffs on unfairly traded steel and other products help to stabilize America’s most important industries, safeguard tens of thousands of jobs, and protect national security. My union, the United Steelworkers (USW), never seeks these remedies lightly. And presidents, Republican and Democrat alike, implement them only after diligent investigations documenting the harm that foreign adversaries intentionally inflict upon our country with dumping, overproduction and other kinds of trade cheating. I don’t think Lewis Leibowitz considered these points while criticizing tariffs in his excessively pro-free-trade column, “Where is the voice of the consumer?” on May 5.

Leibowitz on trade: Where is the voice of the consumer?

The election campaign is white-hot right now, and the Biden administration is touting its protectionist message. Just this past week, the Office of the US Trade Representative (USTR) touted this message. In a release entitled “What They are Saying,” USTR quoted many of the usual protectionist groups praising government action against Chinese steel exports and shipbuilding. Consuming industries in the United States, which employ many times the American workers as the industries seeking trade protection, were not mentioned.