Futures
March 3, 2016
Hot Rolled Futures: Here's David...
Written by John Packard
The following article on the hot rolled coil (HRC), busheling scrap (BUS), and financial futures markets was written by Dave Feldstein. As Flack Steel’s director of risk management, David Feldstein is an active participant in the hot rolled coil (HRC) futures market and we believe he will provide insightful commentary and trading ideas to our readers. Besides writing Futures articles for Steel Market Update, David produces articles that our readers may find interesting under the heading “The Feldstein” on the Flack Steel website.
Before getting into the wonderful world of futures, let’s finish our coffee and briefly discuss the US domestic manufacturing and steel industry. US demand has been struggling for some time. The US steel mills have been battling global price devaluation (raw materials, finished products, energy), which has led to capacity rationalization and the launching of trade cases in HRC, CRC and HDG products. Imports have been declining for months, both as a result of the trade cases and weakening demand. The normal buzz of Q1 deals wasn’t heard in the fourth quarter of 2015. The OEM’s had adjusted their buying behavior to reflect short lead times and now, as evidence in the HRC CRC differential, the uptick in demand in 2016 (see January durable goods data) is causing a sharp tightening of availability in the market, especially in CRC and HDG products. As you can see below, the HRC futures hadn’t been reflecting this tightness; in fact the market had been under pressure for weeks.
