Hot Rolled Futures: Holiday Mutes the Market

The following article on the hot rolled coil (HRC) steel and financial futures markets was written by Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

Steel

Since the end of last week, which was very quiet due to year end, the Futures markets have been relatively muted even with the latest round of mill price increases. With this latest round of increases, we have seen HR mill prices reach $700/ST [$35/cwt] at some mills.

Futures markets are proving slow to process the latest announcements likely due to the fact that many are still on break. Futures volumes have been light with the New Years Holiday this week. Despite somewhat bullish sentiment in HR futures, buyers have remained cautious.

We traded just over 27,000 ST of futures at a slight premium to where the latest spot indexes were reported just north of $650/ST. The bulk of the futures trading fell between the months of February and May’18 (15,500 ST at a weighted average price of $663/ST, roughly). Today, Feb’18 continues to tick higher with $670/ST last traded.

This week Cal’ 18 traded at $657/ST, which helped bring the latter half of 2018 futures prices slightly lower than where they closed 2017. So, some increased backwardation has crept into the latter half of 2018, which will need to be tested with some more trading volume to get a clearer sense of valuations.

Improving demand from the energy sector could potentially buoy HR futures prices further out on the curve, as well as rising scrap prices. So, participants will be focusing on next week’s recorded spot prices, as well as lead times, to see if the latest round of mill price increases will stick. The market will also be watching for any new developments on the 232 front.

Below is a graph showing the history of the hot rolled futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.

Scrap

HMS 80/20 scrap prices have remained flat this week with Jan’18 SC trading at $369/ MT here today. Slight bullish sentiment remains as Turkish buying is expected into Feb’18. Seasonal supply issues due to weather will probably keep prices elevated.

In domestic prime scraps, the market chatter has Jan’18 BUS prices up by $30/GT. Increased demand for the energy sector has price expectations moving higher into Feb’18. However, buying interests continue to fall short of where sellers are willing to offer out their BUS. Cal’18 is basically $365 bid and offered at $400/GT.

Below is another graph showing the history of the busheling scrap futures forward curve. You will need to view the graph on our website to use its interactive features; you can do so by clicking here. If you need assistance with either logging in or navigating the website, please contact our office at 800-432-3475 or info@SteelMarketUpdate.com.