Daily Futures Update 24/02/2020

Futures await direction from physical, EAF curves recover slightly

Steel Futures trading moved into a kind of holding pattern on Monday, when sentiment remained fairly firm but buyers were reluctant to push higher while further direction from the physical market is absent. EAF conversion margin futures edged into slightly more bullish territory, with finished products instruments moving higher. But US sell-side pressure emerged later in the day, threatening to derail this move.

Exchange Prices at 1630 GMT

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LME SCRAP & REBAR FUTURES

LME Rebar futures continued to edge higher on Monday on news that Turkish domestic rebar prices have risen as high as $450/mt exw, sparking speculation that exporters will continue to push higher as well. An absence of fresh news from the physical scrap market kept LME Scrap futures trading quiet, with a bit more selling right at the front end – presumably physical inventory holders availing themselves of Carry at generous levels.

US HRC FUTURES

US HRC futures continued to push higher during the busiest morning trading session with rumors that US mills are due to announce a price increase over the next few weeks in response to a firm market for raw materials. But, with lead times still short and inventories at service centers anecdotally reported as fairly high, there are still plenty of nay-sayers out there. As a result, the curve was sold lower again as we moved into the afternoon trading session – albeit on much thinner volumes.

FOB CHINA HRC FUTURES

Time spread traders have plenty of possibilities to consider when it comes to LME FOB China HRC futures. Concerns regarding the spread of COVID-19 are keeping the front end of the curve well-offered while anticipation of Chinese government stimulus has buyers on the look out for medium- and long-term bargains.

US SCRAP FUTURES

Sentiment is strong for the upcoming March scrap settlement, with Busheling looking particularly firm against a backdrop of higher international prices. The front end of the CME Busheling futures curve continues to gain altitude as a result, although longer-dated periods were well offered on Monday.

MINI-MILL SPREADS

LME EAF conversion margins are responding well to the lull in fervour for spot and LME Scrap futures, with the gradual improvement in paper market rebar conditions putting the curve back above $150/t for the first time in several weeks.

The CME EAF conversion margin forward curve is moving returning to Backwardation at much higher levels that a few weeks ago – potentially a bullish sign for this market. However, considering the slightly improved spot market sentiment for finished products is fragile and reported prompt Busheling supply is tight, this may not remain the case for long.

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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