Settlement prices this week on the CME US Midwest Hot Rolled futures contract increased nearly USD 10 per ton for Q4 2012 periods and USD 2 per ton for calendar year 2013 periods.

Volumes this week were very light with only a handful of trades going through; most of which were concentrated on cal 13. The Q1 traded a few times at USD 630 early in the week before being bid up to USD 635 as the week progressed with offers unwilling to sell sub USD 645. The calendar year 2013 was bid at USD 630 to start the week before being bid up to USD 635. The Q4 2012 traded at USD 602 a significant improvement from the past week which saw the same period sold down to USD 592. Iron Ore and Shanghai rebar futures also firmed up this week is the futures market for steel and steel metallic signaling that strength lies ahead?

We were surprised to see significant new buying interest for HRC futures materialized this week since we’ve entered calendar Q4 and end users are anxious to start locking in next year’s prices. Despite a softening physical market the futures market remains better supported. Could savvy market participants be anticipating a sooner than expected bottoming of spot prices?

There has been little macro news the past week to spur much activity in the steel market. After the Fed’s recent stimulus announcement that sent markets racing, commodities markets have seen a pull back as traders await tangible evidence of this new influx of cash into markets.

The physical HRC market has not experienced nearly as robust support as has the futures market with spot prices falling a further USD 10-20 per ton week on week sitting at USD 615. New order entry continues to be anemic as many end users remain on the sideline awaiting the bottom of the market before placing their next buys. With that said, the doom and gloom of last week which had many market participants thinking we may see prices slide to the low USD 500s, seems to be abating a bit. A consensus is starting to form that the market will find a floor in the coming couple of weeks around the USD 580 level. With the dollar weakening, steel production at a 20 month low, iron ore price continuing to push higher globally and the domestic scrap market not as bad as has been reported, a shallower fall in prices for HRC may be in the cards before we see another rebound in prices.

Source - Steel Market Update

(www.steelguru.com)