HR Futures: Major trade developments lift the ferrous complex

Latest datapoints: Nucor consumer spot price (CSP) now at $900 per short ton (st) as of Monday. Meanwhile, Apr’25 futures have breached $970/st as of the close on Tuesday.

The curve, however, dips sharply into Q3’25 by approximately $100/st. This raised the question: Are these price levels a reflection of a structurally weakened import market, or simply a symptom of short-term peak demand?

At this juncture, it’s worth revisiting net positioning on CME HRC. According to the Commitment of Traders report from Feb. 25, there are 40,543 lots (810,860 st) of open positions on HRC flat price – an increase of 66,760 st week over week.

Historically, the last time the market carried this level of exposure was in Q4’21-January 2022, when HR futures were trading near $1,900/st before a swift collapse to $1,052/st by the end of February 2022.

CFTC total lots open positions on CME HRC with M1 and M3 rolling prices

Source: Bloomberg, CFTC

The key takeaway isn’t that HRC prices are destined to double, but rather that volatility and liquidity have returned. This offers traders more incentive to carry positions and engage in new exposure.

Take import arbitrages, for example: (basis close of business March 4. On paper, the Apr’25 US HRC over Euro HRC spread implies a $323 per metric ton (mt) differential.

Breaking this down:

• Apr’25 Euro HRC futures price ex-works Northern Europe: €647/mt
• Estimated freight: €50/mt, yielding €697/mt landed
• Converted to short tons: €632.31/st
• Converted to USD using a 1.063 forward rate
• Adding a 25% tariff: $743.55/st landed in the US
• Comparing with Apr’25 US HR futures at $970/st, this leaves a $226.45/st spread. That’s plenty of margin to account for additional port, stevedoring, and transport costs. At minimum, this warrants closer investigation.

On the flip side, US HRC vs. LME FOB China presents a different picture (basis close of business March 4).

• Apr’25 LME FOB China settled at $472/mt
• Factoring in container freight of $174/mt (basis WCI Shanghai to Los Angeles), landed costs on the West Coast amount to $645.85/mt
• A 35% tariff on Chinese-origin steel brings the final price to $871.89/mt ($790.98/st).
• Compared to West Coast CSP pricing at $960/st, the $169.01/st spread appears less enticing than the EU differential but remains relevant given the US HRC curve structure.

While these arbitrage scenarios seem attractive on paper, the feasibility of executing such trades remains low given the inherent risk in physical transactions of this nature. However, they provide insight into why the CME HR curve is structured as it is.

Beyond pricing, geopolitical risk continues to add layers of complexity. Speculation around $1 million levies on Chinese-flagged ships docking at US ports could further disrupt import flows, while tariffs extending to raw material inputs especially in North America could upend even scrap trade dynamics.

With these evolving factors, the market is at an inflection point. Futures remain reactive to new developments, and the next significant move could be dictated by policy shifts rather than traditional supply-demand fundamentals. As the interplay between tariffs, trade routes, and domestic production costs intensifies, staying ahead of these developments will be critical for navigating the evolving landscape.

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