US ferrous futures come under pressure as spot prices rally
US hot-rolled coil futures came under pressure May 14 to close out the week, following the rest of the metals complex and a steep decline in iron prices overnight. The rally in the spot market remained intact during the week.
The Platts TSI US HRC index was up $53.35/st during the week as of the May 14 close.
The June/December spread has loosened significantly over the past month to around $215/st before tightening back to around $270/st on May 14. The spread has eased about $115/st during the last month. Activity then picked up in the June contract with those hedges rolled out as well. This took place as the spreads continued to loosen and the structure of the curve was flattening, as fresh buying has come into the market for the second half of the year and into 2022.
Recently the market has seen the rolling of hedges picking up from May and June in the third and fourth quarters. The spread activity picked up early May, with short hedges rolling from the May contract into Q3 and the December contract.
“Broader commodities selling spilled over into the HRC market which was due for a technical correction,” a trader said. “The rallying hasn’t been tested in quite some time and was due for a correction.”
CME Group’s June contract was down $144/st from the high hit on May 11 at one point during the May 14 session, coming in at a low of $1,500/st. That high came in at $1,644/st on May 11.
Market sources are expecting imports arrivals to peak in August or September.
October contract prices also declined steeply, dropping $150/st from the high of the week to the low of $1,395/st.
Fundamentals were still intact in the near term, with demand outpacing months prior, according to sources.
“Demand remains strong and mills [are] not budging much on price,” a Midwest service center source said.