WoW Executive Summary

ISSUE #339 – Week Over Week Report 7/8/22

Since late March, Turkish scrap steadily sold off as fear around a raw material shortage subsided, until rebounding above the $350 level mid-June. Up to this point, the rally in Turkish Scrap has been an anomaly among the ferrous markets, and sustainability of the rally is highly uncertain, however it is an important reminder that each market will be impacted by both macro and domestic forces and that prices will not go down forever.

Upside Risks:

  • China reopening its economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Seasonal pick-up in demand leading to regional shortages
  • Easing supply chain restraints and labor shortages causing an increase in manufacturing activity
  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals later this year

Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Increased domestic production capacity leading to an increase in competitive pricing
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock at elevated prices and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates

 

  • The Midwest HRC Index was down another $50 to $940.
  • Global flat rolled indexes were mostly lower, led by Black Sea HRC, down another 5.7%, while Antwerp HRC was slightly higher up 1.1%.

The Midwest HRC futures curve is below with last Friday’s settlements in red. The front of the curve was under the most pressure and the result was steeper contango, which suggests the market is currently oversupplied.

 

REGISTER TO ACCESS FULL REPORT

ISSUE #338 – Week Over Week Report 7/1/22

On Friday, July 1st, there was a large release of economic data from the U.S. and Global Manufacturing PMIs as well as construction spending. The data was mostly below expectations and is representative of the recent slowing in the broader economy. With that in mind, the HRC spot price clearly has room to move lower, however, the forward curve is approaching FGM’s estimated cost floor for both imports and domestic producers.

Upside Risks:

  • China reopening its economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Seasonal pick-up in demand leading to regional shortages
  • Easing supply chain restraints and labor shortages causing an increase in manufacturing activity
  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals later this year

Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock at elevated prices and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates

 

  • The Midwest HRC Index was down another $60 to $990.
  • Global flat rolled indexes were mixed. Black Sea HRC was down another 10.2%, while Chinese spot HRC was up 1.4%.

The Midwest HRC futures curve is shown below with last Friday’s settlements in white. The front of the curve was slightly lower while expirations Sep-22 and beyond all increased. This represents the first time that the curve traded in contango since it happened briefly in February, just before the Russian invasion into Ukraine occurred.

REGISTER TO ACCESS FULL REPORT

ISSUE #337 – Week Over Week Report 6/24/22

The current downside move in US HRC, which started in the September 2021 and was briefly interrupted by fears around a raw material shortage, has resulted in an average weekly decrease of 3.4%. The forward curve today is pricing in 5 more weeks of declining spot prices before flattening. However, the current forward curve is trading above FGM’s estimated cost support level – it would take an additional 10 weeks at the current pace for spot prices to breach the current cost support estimate.

Upside Risks:

  • China reopening its economy with further stimulus measures
  • Unplanned & extended planned outages, including operational issues leaving mills behind
  • Seasonal pick-up in demand leading to regional shortages
  • Easing supply chain restraints and labor shortages causing an increase in manufacturing activity
  • Reluctance in placing import orders, leading to a dramatic reduction in arrivals later this year

Downside Risks:

  • Decreasing input costs allowing mills to aggressively sell lower while remaining profitable
  • Elevated price differentials and hedging opportunities leading to sustained higher imports
  • Steel consumers substitute to lower-cost alternatives
  • Limited desire to restock at elevated prices and persistently short lead times causing a “Buyer’s Strike”
  • Economic slowdown caused by increasing interest rates

 

  • The Midwest HRC Index was down another $20 to $1050.
  • Global flat rolled indexes were lower, led by Antwerp HRC, down 11.2%.

The Midwest HRC futures curve is below with last Friday’s settlements in white. The entire curve shifted lower except for the front month, Jun-22 contract. The largest shift down can be observed in the midsection of the curve with a $70 decrease in Aug-22.

REGISTER TO ACCESS FULL REPORT