Daily Futures Update 21/02/2020

Another firm day for steel futures consolidates a bullish week

Friday’s steel futures trade consolidated this week’s gains in most markets, with CME Busheling futures moving back into Contango (at the front end) and EAF conversion margin futures closing higher than Monday’s open. Spot market sentiment appears to have turned, with prices rallying in many regions. But high stock levels and short lead times could mean this recovery is short-lived and we continue to urge caution.

Exchange Prices at 1630 GMT

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LME SCRAP & REBAR FUTURES

Mixed messages from the physical market weren’t enough to derail the LME Scrap Futures market march higher, with the front end of the curve jumping again on Friday. This marked the end of a week where the paper market has consistency presaged higher physical market bookings. It remains to be seen whether this trend will continue into next week. LME Rebar futures also rose at the front end, with reports that Turkish exporters continue to increase their offer prices.

US HRC FUTURES

Rapidly improving spot market sentiment gave additional fuel to the rally in US HRC futures on Friday, pushing the forward curve into a much flatter shape than we have seen recently. Rumours that steel mills may soon announce price increases was enough to get paper traders lifting nearby offers.

FOB CHINA HRC FUTURES

Friday saw LME paper traders give back some of the nearby periods they had bid higher yesterday, with a series of alarming statements on th Coronavirus through the day. The back end of the curve remained well supported. But any sustained spot price softness will likely undermine this.

US SCRAP FUTURES

The improvement in physical market sentiment for finished products translated to a rapid run up in the CME Busheling futures forward curve, which pushed back into Contango. A firmer Deep Sea market for obsolete grades and expectations that domestic steel mill demand will remain strong have supported this move.

MINI-MILL SPREADS

LME EAF conversion margin futures ended the week higher than they began, with most of the curve beyond the front month pricing around $150/t. The plunging Backwardation into the front month suggests that Turkish mills will be unable to sustain finished product prices and scrap will remain firm. 

The US EAF conversion margin forward curve has had a bullish week, having risen off lows that are more in line with the pre-232 market scenario on Monday to trade much closer to spot today. 

GLOSSARY

This newsletter references various technical words, phrases acronyms and codes. The following Glossary provides further explanation – please don’t hesitate to reach out and suggest additions.

Calendar Months:

Instruments:

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