Iron Ore and Busheling Scrap Futures

Andre Marshall of Crunch Risk, LLC shared the following information about iron ore and busheling futures trading for the past week.

Iron Ore:

As always traders make a big deal about the Chinese post New Year’s holiday making a big buying push upon their return, but it appears whatever buying has been done hasn’t been enough to rally prices in Q1. We found support at $120/MT over the holidays and we have bounced ever so slightly to $122/MT since their return. What’s the expression “when you’re expecting a roar and you get a whimper.”

That said, as China’s motives and actions are so opaque, it’s hard to know what prices will do. Status quo, however, should bring further decline. It is interesting to note as well that rebar futures hit all time lows in this dip, which has not been reflected in raw material values and could be a sign of its price direction. Let’s call Mar ’14 either side of $121/MT, Apr ’14 either side of $119/MT, Q2 ’14 either side of $118/MT, Q3 ’14 either side $115.50/MT, Q4 ’14 either side of $114/MT and Cal ’15 either side of $110.75/MT.

Scrap:

Well it has been a long talked about storm and it appears to have indeed arrived, and it’s global in nature. The CFR Turkey has been under pressure for a number of weeks, losing yet further still this week, down another $9/MT to $357/MT. We are now some $35/MT lower than the high. Futures in CFR have been quiet as it has been a one way market. Domestically we appear to have caught up with the global market all in one storm, with February prices down $35.77/GT on the BUS index to $409.09/GT. However, the real story is that things are even worse with Shred being traded down as much as $50.GT in some zones. If one looks at the CFR Turkey levels and extrapolates to a Mid West number, it looks like we have more room to go unless either the export market or the mill appetite improves. It hasn’t been much talked about, but I find it interesting that at the same time the market is surprised by the swift move down on scrap, Nucor has recently been operating its DRI facility and making deliveries. Combine that with lack of exports and we appear to be awash in units.

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