Hot Rolled Futures: Market Bottoms Out

Today’s hot rolled coil and ferrous scrap futures article is written by Bradley Clark, Director of Steel Trading at Kataman Metals.

The market seems to have bottomed out with the CRU coming in at $640 yesterday.  Positive sentiment has outweighed any negatives in the market with AK Steel recently announcing a price hike of $20/ton and HRC futures rising accordingly.   

A few weeks ago, nearby months were trading around $620/ton, but have been on the rise ever since, with Q1 15 settling at $640 yesterday – more than a $5 increase from the day before and over 15 dollars on the week.  Upward pressure on prices has come from abroad as well.  The U.S. recently canceled an agreement with Russia that forbid tariffs on Russian steel exported to the U.S., which has greatly eased concerns of cheap imports flooding domestic markets.  U.S. steel prices will likely continue upwards as the recent ending of quantitative easing by the Fed is indicative of a strengthening U.S. economy

Volume started the week off slow with nothing trading, but picked up slightly Wednesday with a little over 5,000 tons trading.

Below is an interactive graphic depicting the latest hot rolled futures forward curve with a comparison to four weeks ago. The graph can only been seen and interacted with when you are logged into the website and reading this article online (otherwise it just appears to be an empty space on your screen).

{amchart id=”73″ HRC Futures Forward Curve}

Scrap prices are expected to continue downward in the near term as cheaper iron ore and coking coal make Electric Arc Furnaces less competitive.  Furthermore, an excess supply of scrap in the U.S has come as a stronger dollar makes scrap exports less attractive in international markets.

Below is another interactive graphic, but for the latest busheling scrap forward curve in comparison to the same curve from four weeks ago.

{amchart id=”74″ BUS Futures Forward Curve}