More sellers take advantage of record LME Scrap Carry Trade Opportunities, nearby US steel futures offered lower again
While the LME Scrap futures Contango finally had a few more sell-side takers on Wednesday, US-focused steel futures markets maintained the trend of longer-dated periods attracting higher bids than the front end of the curve. Q2-20 US HRC futures sagged as it looked increasingly likely announced steel mill output reductions will not be enough to keep track with collapsing demand. As a result, CME metal margin futures continue to fall, although LME EAF conversion margin futures found a little support.
Exchange Prices at 1630 GMT
Disclaimer: This report is issued by Price Consult Ltd, which is not a regulated entity. The report was prepared and distributed for information purposes only. The report may contain information and opinions which are the author’s own and may be used as the basis for trading undertaken by the author. The report should not be constructed as a solicitation nor offering advice for the purposes of the purchase or sale of any commodity, security, investment or derivatives. Whilst Price Consult has taken all reasonable steps to ensure this information is correct, Price Consult does not offer any warranty as to the accuracy or completeness of such information.Any person placing reliance on the report to undertake trading does so entirely at their own risk and Price Consult does not accept any liability as a result.
LME SCRAP & REBAR FUTURES
LME Rebar futures rose slightly on Wednesday, responding to the run up in the LME Scrap futures curve over the past few days despite a dismal spot market with barely any activity reported. And the aggressive LME Scrap futures Contango finally proved too tempting to bare for some physical players, with more sellers coming into the market at very large premium to spot. There’s still plenty of room for those others holding stock to implement carry trades at record-breaking levels here.
US HRC FUTURES
Q2-20 sell side interest was sustained in the US HRC futures market and this period was pushed lower again in a screen-focused day of trading. Last week’s improved sentiment that US steelmaker output cuts would provide some support for spot pricing has evaporated as the COVID-19 crisis has intensified in North America. Longer-dated periods were offered as well, albeit by a lesser amount – leading to a stronger medium- to long-term Contango.
US SCRAP FUTURES
Surprisingly, CME Busheling futures traded positively on Tuesday while Reductions in US spot market demand for finished products have become more and more apparent over the past few days and CME Busheling futures traders were happy to offset any long-side exposure they have been holding. As more dockside operators close their gates the supply pool to the domestic market seems to be building and sentiment is worsening as a result.
The slight recovery in LME Rebar futures trading conditions helped to stabilize LME EAF conversion margin futures on Wednesday and the curve moved slightly higher. However, longer-dated periods remain in distinct Backwardation and continue to represent a buying opportunity, in our humble opinion.
Meanwhile CME EAF conversion margin futures continue to sag, trading closer to $200/t and loss-making territory for mini-mills producing flat products on Thursday. News of sustained auto manufacturing outages due to the COVID-19 outbreak means that CME Busheling futures declines are not keeping pace with those posted by CME HRC.
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.