Mr Andre Marshall of Crunchrisk LLC said that what looks on the surface as Risk On again activity is in reality short cover where shorts have had to scramble for the exits as markets rallied upon news of Germany's re commitment to the debt crisis in Europe. I feel like we have heard this before.
And so it goes the market continues to trade as a reaction to news. This is causing violent swings and apparent re-directions in a marketplace where sadly nothing has changed. Europe’s debt remains almost insurmountable, Chinas growth is failing, and resources, which were once in chronic shortage, continue to build inventories throughout the distribution channel. It might be of interest to note that Chinese copper stocks, which are mostly wrapped up in finance schemes are at their highest levels, likely north of 1 mln tons. Meanwhile in Aluminum there are over 8 mln tons wrapped up in warehouse finance deals throughout the globe. We all know of the Iron Ore glut building in various places in the channel, and the rumors of steel stocks in China continues at a high pitch.
And here once again, the US is the bright spot. Having addressed our mess 3 years ago, when it was prudent, our ever so modest growth (1.7%) is now the strongest economy in the land?
And the future looks far from comforting with an election in the US, a change of power in China and a precarious re election possibility for Angela Merkel's Christian Democrats. Add to that impending tax increases here and abroad and growth looks far from clear.
Well in the futures space we have had an ok week. We have traded 755 lots or 15,100 short tons. End week last week Q4 and Q1 traded either side of USD 640 and USD 650 respectively. This week 2nd Half 2012 traded USD 630 per short ton. The mills price increase announcement has sent the sellers into the shadows for the moment and the bids have risen steadily.
| CME contract month | HRC closing price | Change from last week |
| Jul '12 | 605 | 5 |
| Aug '12 | 610 | -10 |
| Sep '12 | 620 | 5 |
| Oct '12 | 625 | 0 |
| Nov '12 | 630 | 5 |
| Dec '12 | 630 | -10 |
| Average | 620 | -1 |
| Jan '13 | 653 | 3 |
| Feb '13 | 653 | 3 |
| Mar '13 | 653 | 3 |
| Apr '13 | 665 | 5 |
| May '13 | 665 | 5 |
| Jun '13 | 665 | 5 |
| Average | 659 | 4 |
In USD
Meanwhile CRU today came out at USD 592 per short ton down by USD 14 per short ton. This reflects reality that most buyers now are receiving units below USD 600 per short ton. It will be interesting to see if the price increases, that are posted around USD 630 per short ton will stick. Auto appears to continue to be the pillar of support for steel. We saw again that MoM increase for June 2012 was up 2% and we are again back above the 14 million rate. We will see how much of this current demand is real and how much might be in preparation for the USW talks. Early reaction to price increases basis current RFQ's and spot orders suggests this may be a struggle for the mills despite slightly increasing lead times.
Source - Steel Market Update
(www.steelguru.com)
