Steel Futures find a floor on short covering

Sell-side pressure persists as traders nervously watch finished products pricing

Most steel futures markets found a floor on Wednesday after the previous day’s widespread sell-off, with onshore Chinese futures setting the precedent early on. CME HRC futures moved higher and the Metal Margin forward curve gained as well. LME EAF complex futures were the odd ones out, with concerns over finished products pricing trumping any support that a pricier Iron Ore Futures market might otherwise have brought.

Exchange Prices at 1630 GMT

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LME SCRAP & REBAR FUTURES

LME mini-mill futures continued to trend lower on Wednesday when finished products buyers continued to resist mill offers around the globe, sparking further concern that Turkish EAFs will need much lower scrap prices in order to keep melting.

US HRC FUTURES

US HRC futures staged a slight resurgence on Wednesday after the day before’s sell-off, with nearby offers being lifted through a combination of short covering and physical hedgers rolling their paper positions into longer-dated periods. The result was a further gradual softening in the Contango back towards the cost of carry.

US SCRAP FUTURES

CME Futures found support on Wednesday, with only long-dated periods being offered slightly lower. Yet more mills announced stoppages and capacity curtailments, which left some paper traders more willing to sell at a premium to spot market levels. Others remained convinced that tight supply will support prices into next month and beyond.

MINI-MILL SPREADS

LME Metal Margin futures dropped fairly significantly at the front end of the curve on Wednesday, when traders remained concerned about the lack of traction for Turkey’s latest rebar export offers. This provides an interesting opportunity to roll short positions farther forward at a premium – presumably attractive to those with spot exposure to this differential.

CME Metal Margin futures recovered on Wednesday when US HRC futures looked to hav established a floor. Still, this curve is trading at a fairly significant discount to historically-observed levels.

GLOSSARY

This newsletter references various technical words, phrases acronyms and codes.

You can find explanations for many of these terms in The Board Report glossary.

The product codes and prompt date structures we utilize are as follows:

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