LME US HRC steady as futures look to spot market for guidance

US hot-rolled coil futures on the London Metal Exchange pulled back slightly from recent highs in the week ended March 21 but traded steady, as rising input costs have triggered price increases from steelmakers, supporting futures further down the curve.

The structure of the forward curve tightened but still held at wide contango as futures retreated from recent highs. Spot prices were stronger with rising mill offers and service centers were committed to only buying what they needed to fill demand gaps in inventories, as buying activity remained slow during the week with the higher mill offer levels.

The March contract settled at $1,200/st March 28, up $35/st on the week.

The April contract settled at $1,472.50/st, down $5/st from the March 21 close but still up $57.50 from the start of the first quarter. Spot prices have recovered some of their recent losses, but were still down $200 during the same period as buyer inquiries have yet to translate at purchases at these higher mill offer levels.

The spreads tightened during the week as trading volumes were steady week-on-week, and spot prices were firmer during the March scrap buy week, settling at $1,380/st March 25, up $80 on the week.

The spot-to-three month spread narrowed but remained in contango, last settling at $175/st. Second-quarter contracts continued to see support, and bids for spot volumes continued around the $1,300/st-$1,400/st level with offers rising to the $1,450-$1,500/st range as mills scrambled to secure raw materials amid concerns of a possible disruption after Russia’s invasion of Ukraine.

The contract’s volumes saw 500 st trading. More than 632,000 st have traded since the contract’s launch in 2019.

Spot prices in the physical market have recovered as inventories, which have been the main driver of a price correction, remained at elevated levels, and some physical traders and importers have stopped quoting future tonnage due to uncertainties around input costs.

The average mill lead time for HRC ticked up to 5.3 weeks as April production has sold out amid availability from several mills, according to S&P Global Commodity Insights data.

— Nick Ruggiero