HRC futures: Market awaits catalyst from a fragile floor

After a bruising summer, the selloff has run its course. But conviction hasn’t returned. The October market feels suspended. It’s caught between supply restraint and sluggish demand, between fear of no upside and disbelief in a rally.

CME Midwest HRC Futures Curve (10/9 in white, 10/2 in blue, 9/4 in orange)

The HRC futures curve’s evolution from September to now mirrors that sentiment. At the time of my last column (9/4, orange line), the curve resembled an effort to establish a structural floor, pricing in near-term weakness and distant optimism – a classic contango.

By early October (a week ago, blue), the front of the curve had caught up, flattening as mills defended spot pricing and buyers tested the bottom. Today (white), the curve has compressed further into a narrow band, signaling a move from pricing weakness to pricing equilibrium.

Spot has effectively met the forward curve, contango has faded, and incentives to carry inventory have diminished. The message is stability rather than recovery. Yes, near-term supply looks tighter. But deferred months’ reluctance to reprice higher shows limited faith in demand growth through 2026.

Risk now appears asymmetric, with firmer downside protection and capped upside. The curve implies a range-bound market over the coming quarters.

CME HRC Money-Manager Positioning

That read is echoed in the money-manager positioning. Net length sits just merely above flat. Funds have stopped pressing shorts but haven’t really rebuilt longs either. The setup is neutral to lightly constructive, not bearish, but cautious by essentially pulling risk off the table.

It’s a posture of patience rather than conviction, a base-building phase. With little fuel for forced moves, the market is effectively on hold until a catalyst emerges.
On the physical side, the same fragility holds. Recent stability owes more to supply discipline than to any real demand revival. Outages and fading import flows have trimmed availability and nudged lead times up.

Mills sense the bottom is in, but buyers are seemingly not ready to chase it as sentiment remains subdued. Demand weakness continues to weigh, and scrap prices softened into October – keeping a soft-sideways rhythm, stable but uninspired.

Policy remains a big factor, as the 50% Section 232 tariff regime dominates the backdrop. The US-Canada negotiations linger without a timetable. Both sides have expressed optimism. But details are vague.
Meanwhile, Europe and Mexico have each revisited their own tariff frameworks. The uncertainty creates hesitancy to commit, with market players wary that any policy adjustment could reset the stage overnight.

Altogether, the market is no longer falling but still searching for direction. Prices have stabilized, supply discipline is evident, and speculative pressure is minimal. What’s missing is belief.

Steel stands on a fragile floor, thin and cautious, but holding. A confirmed restock, a deeper outage impact, meaningful policy clarity, or some other kind of shock event could turn that floor into a true base. Until then, the market sits in quiet balance: not bearish, not bullish, just waiting.

Disclaimer

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