EAF Futures diverge by region

Suprise Busheling pay sparks US short-covering

EAF futures moved in different directions by region on Thursday, with a large volume nearby CME Busheling purchase sending the US complex quickly higher into the close while the LME was offered lower again. Friday’s opening electronic trading saw a mild reversal of this divergent trend. But we suspect the short covering in US futures isn’t yet done.

Exchange Prices at 1630 GMT

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LME SCRAP & REBAR FUTURES

LME Scrap futures remained a victim of worsening sentiment for finished products, with the continued failure of Turkish exporters to win higher-priced rebar orders leading paper trader to expect a decline in raw materials. Although prompt ferrous scrap supply appears tight, we continue to believe it unlikely that mini-mills will produce at a loss for a sustained period of time, so the curve moves were understandable.

US HRC FUTURES

US HRC futures bounced aggressively as the market approached closing on Thursday, with a high pay for CME Busheling futures sending US EAF complex shorts searching for cover. Nearby periods were the primary benficiary, indicating that naked sell-side interest remains concentrated here.

US SCRAP FUTURES

Bullish paper market sentiment for CME Busheling futures finally blew out its cork on Thursday, with an aggresive buyer paying $10 through value for a large volume block of Jun-20 and Jul-20. This signfiicantly undermined the Contango, putting it back in line with the Cost of Carry.

MINI-MILL SPREADS

LME EAF Melting Margin futures remained depressed on Thursday as the Complex’s outright futures drifted lower, with this curve hovering along around break even levels.

CME Metal Margin futures also held steady on Thursday, with the jump in the CME Busheling futures curve pushing finished product prices just as quickly.

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:

Calendar Months:

Instruments:

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