Demand remains firm as supply increases in the market
Front curve offsets still intact
The main scrap metal markets supported
Hot-rolled coil and waste bushel futures in the United States continued to rise during the week ended June 22, after record spot prices for the week and demand remained strong even as suppliers are starting to push more metal.
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Market participants mentioned concerns about rising transportation costs and continued bottleneck as possible factors.
Transaction volumes have fallen slightly from week to week. Some positions continued to slide down the curve in order to cover the rise in spot prices. New buys coming from December to the end of 2022, as spreads have eased along the curve this week. The HRC spot market has recently seen tradable spot values of up to $ 1,750 / st for August production. Offers of $ 1,720 / piece to $ 1,750 / piece from integrated plants for August production, with cold rolling transactions ranging from $ 1,920 / piece to $ 2,040 / piece.
The Platts TSI US HRC Index hit a record high of $ 1,692 / st on June 21, as prices have risen $ 1,252.75 / st since August 2020, when the recovery began.
Spot price driven by demand
The June / July gap shifted to another contango exchange just above $ 80 / st on June 22, against a $ 40 / st shift on May 18.
The structure of the forward curve continued to flatten over the week but the offsets persist. The June / December gap eased to around $ 181 / st on June 22, compared with a shift of $ 334 / st on June 1, as most of July’s production ran out, forcing prices to ride lower on the curve with limited availability even for July. / August national production. The hedge rollover has moved lower on the curve as it will be more difficult for the market to hedge imports in the future as the structure of the curve steepens. New purchases emerged mainly from the fourth quarter of 2021 to the fourth quarter of 2022, as import offers slowed down at the end of the year.
The December contract hit new highs of $ 1,488 / st on June 22. The Q3 / Q4 gap slackened to around $ 185 / st of offset against around $ 216 / st of offset the previous week.
Contracts for 2022 continued to see volumes with Q1 2022, trading from just over $ 60 / st to $ 1,340 / st on June 22, just under 1,200 lots traded in 2022 to during the week ended June 22.
Spreads eased slightly over the week ended June 22, as offsets eased but persist, as is the case in many short-supply markets, sources said. The curve remains steep due to long delivery times from domestic factories and limited imports available before the end of the year.
Import delays helped flatten the curve in the previous April and May, but that opportunity closed as spreads shifted to a more pronounced offset and those delays are now pushing to the end. of the year, leaving many participants unwilling to reserve tonnes at most the end of the year. The June / Q3 spread has moved further into the contango, trading around $ 75 / st, as spot prices are expected to remain strong in the near term. June / Q4 also shifted over the week to around $ 115 / st with new hedging further down the curve. Most of the biggest volumes were from July to August and September, as the offsets of both spreads eased over the week, short hedges seemed to benefit, along with new buys until the first half of 2022. .
U.S. factories’ HRC production times edged up to 8.4 weeks on June 16, well above the 10-year average of 4.8 weeks.
Import offers remain rare as delivery times approach the end of the year. Rising transportation costs from Houston, especially by truck, make imports even more unattractive due to logistics issues. An import transaction was heard at $ 1,560 / st DDP Houston from Korea for August / September shipment through a service center.
As futures continue to rebound, the three-month LME spot spread kept pulling back and the rest of the curve steepened considerably. The fundamentals have not changed and spot prices continue to rise.
At the close of June 15, the latest Commitment of Traders report from the Commodity Futures Trading Commission showed that short positions in the managed currency had decreased from 596 lots to 13,764 lots and that spread positions had increased from 54 lots to 1. 720 lots, while ad short positions increased from 814 lots to 12,077 lots and swap broker short positions decreased by 126 lots to 2,273 lots.
Electric arc furnace plant margins in the Midwest continued to rise the week of June 21, even with higher prices for blue chip scrap, as HRC prices hit new records, with l The Platts HRC / bushel spread rallying at $ 1,120.57 / st and the Platts HRC / shredded spread rose to $ 1,243.12 / st. Margins have increased by around 232% since the start of the fourth quarter of 2020.
Scrap metal remains covered
Midwest bushel scrap futures hit new highs on June 22, with August-December bids above $ 700 / lt. The July / December spread has grown to around $ 40 / liter from the previous week as spot prices look strong ahead of the July buying week. The widening of the arbitrage between HRC and bushel scrap has particularly attracted buyers over short HRC Q3-Q4 covers.
The September contract was trading at a premium of $ 73 / liter to be spotted on June 22, as the market envisioned main scrap consumption from additional FEA capacity, increased auto production, and strong demand from factories. The cash price for Platts’ bushel scrap delivered to the Midwest hit $ 640 / liter on June 17 and has maintained that level.
The spread between the bushel and shredded scrap continued to increase as prices for prime Midwestern scrap rallied during the week ending June 18 to $ 137.25 / liter as bushel prices rose $ 10 / liter to $ 640 / liter, Midwest shredded scrap prices were unchanged at $ 502.75 / liter. ll on June 21, when prices in the Midwest for obsolete grades are expected to decline slightly for July, even with automotive demand picking up from the semiconductor chip shortage. The tightening of the market has been sustained as some mills and scrap dealers have staff issues to melt and move the scrap to meet demand. Southern U.S. bushel scrap prices stood at $ 625 / liter, while southern grinding prices stood at $ 510 / liter on June 21.
“The market value of blue chip scrap in the South has increased from $ 40 / liter to $ 60 / liter for July,” said one trader. While blue-chip scrap prices appeared flat or unchanged for July in the Midwest, a broker said.
The Platts HRC EXW Indiana and Shredded Scrap Delivered Midwest index futures are traded on CME Clearport and CME Globex.