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Daily Futures Update 25/03/2020

Stimulus hopes lead steel futures slightly higher, Contango trend sustains

US steel futures lead the complex slightly higher on Wednesday as hopes for the nation’s $2.5 trillion slated stimulus package triggered an influx of buyers suddenly happy to call the bottom for steel prices. The move provided further support for the widespread Contango presentation in these markets and plenty of opportunity for inventory hedgers to lend their risk to the market above the cost of carry – evidence enough that confidence is still low and nervousness is rife despite the daily move.

Exchange Prices at 1630 GMT

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LME SCRAP & REBAR FUTURES

LME mini-mill futures traded broadly sideways on Wednesday as the paper market attempted to digest a cacophony of news. Rumors of lower-priced bookings into cargo was accompanied by reports that one of the UK’s largest operators has declared force majeure and will be accepting no further inbound deliveries. Once again developments were supportive of the Contango curve shape in both instruments.

US HRC FUTURES

CME US HRC futures surged on Wednesday when paper buyers took hope that the US stimulus package would buoy demand and support prices not just later this year, but also provide a bottom in the near term. As nearby periods caught up with longer-dated prompts, the forward curve shape flattened slightly – although this market remained firmly in Contango territory. Those in the supply chain stuck with inventory and facing shutdown due to the worsening COVID-19 crisis still have plenty of possibilities here.

FOB CHINA HRC FUTURES

LME FOB China HRC futures trading remained listless on Wednesday when ex-China physical spot market offers failed to win many new bookings and traders continued to anticipate further declines.

US SCRAP FUTURES

CME Busheling futures buy-side interest was sustained on Wednesday, tracking the CME US HRC futures market higher as news of further auto manufacturing shutdowns in the States made it more likely that arisings will be constrained in the months ahead. Nonetheless, those in the trade indicate that mills are still pushing hard for deep discounts on next month’s supply, suggesting their requirements will be as little as half their usual flow.

MINI-MILL SPREADS

LME EAF conversion margin futures found a little nearby support on Wednesday as the physical spot market for scrap sagged and more mini-mills constrained output in the Mediterranean basin. Longer-dated periods continue to trade well below the cost of production – a possible opportunity for those wishing to place wagers on the longevity of the COVID-19 crisis.

CME EAF conversion margin futures edged slightly higher on Wednesday when skepticism for forward Busheling prices outweighed the markets’ newfound confidence for finished products.

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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