Steel Futures Sentiment Continues to Soften

Unclear spot market direction is weighing on forward prices

CME Busheling futures continued to slide on Tuesday. A pause in the wider scrap market rally increased concerns that supply will catch up more quickly with demand than some previously envisaged. Plus the narrow forward differential with US HRC futures reduces the potential for another run up. Meanwhile trading in LME EAF Complex futures was quiet as this market too searched for direction.

Exchange Prices at 1630 GMT

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A sense that the Deep Sea scrap market has topped out, at least in the sort term, continued to spread on Tuesday and the LME EAF complex traded sideways. But this morning’s iron ore rally leant some support and there was plenty of liquidity available to those more pessimistic inventory holders which were looking to hedge.


The US HRC Futures Contango sustained again on Tuesday, with interest thin on both sides stemming from a lack of clear direction from the physical spot market. Paper market participants still appear confident that spot prices will continue to rise. But spot market indices have been reluctant to rise, with resulting pressure on the front end of the curve.


What a difference a few weeks makes – CME Busheling futures trading has turned decidedly bearish since an aggresive run up last month and this curve softened again in Tuesday. Improved physical market flows and a narrow differential with CME US HRC futures were to blame.


Broadly speaking the LME Metal Margin futures curve sustained yesterday’s elevated levels on Tuesday, with the physical spot markets for scrap and rebar giving litle away on the prospects for Turkish EAF profitability.

CME Metal Margin futures looked slightly more positive for US mini-mills on Tuesday, benefiting from a cheaper CME Busheling futures curve.


Argus, the provider of the settlement index for this instrument, has kindly allowed us to republish their daily spot market EU HRC commentary here while we gear up for more specific paper market coverage.

London, 16 June (Argus) — Import offers were fairly stable today, with two Turkish mills quoting at $440-450/t fob, and a third mill off the market for Europe owing to the anti-dumping and subsidy investigations into Turkish hot-rolled coil (HRC).

Multiple sources agreed that at current domestic and import prices, Turkish material was attracting no interest whatsoever. “In a regular market an investigation on Turkish HRC should have boosted EU prices by €50/t,” a market participant said.

Northwest European HRC pricing nudged a touch lower today in an overwhelmingly illiquid market, as Argus’ daily benchmark northwest EU HRC index slipped by €0.25/t to €389.75/t ex-works. The Argus daily Italian index held stable today at €377.25/t ex-works.

In the north, some service centres and re-rollers were at 40pc of normal volumes, and in some cases less. Offtake of contractual tonnage in the automotive supply chain remained extremely low, with inventory levels magnifying the reduction from sub-suppliers — original equipment manufacturers themselves were taking 30-50pc of their typical volumes. Mill sources pointed to a similar mismatch between apparent and real demand, similar to last year when an automotive slowdown led to excess stocks and a rundown in HRC prices.

Even tier-one suppliers in the north were heard offering as low as €390/t ex-works despite rising costs, and the limited transactions that did occur were below this level. One northwest mill was reportedly willing to sell as low as €370/t ex-works base.

Italian mills continued to push for higher prices on orders of new rolling material, but it was difficult to convince buyers with discounts for material from stocks prevalent, and as end-product prices continued to decline.


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