CME EU HRC contract has record day

US exchange operator CME Group's North European hot-rolled coil contract had a record trading day today, with the equivalent of 11,000t clearing.

The previous record tonnage was 8,000t on 3 September 2020. The contract has a lot size of 20t.

During the morning a January-February spread traded at €5/t (€700/t for January and €695/t for February), in 1,000 t/month. Later, a second quarter-third quarter spread traded at €60/t (Q2 €630/t and Q3 €570/t) in 1,000 t/month, after which a February bid was paid at €680/t for 2,000 t/month. March also printed at €660/t for 1,000 t/month.

These trades meant a steeper backwardation developed, testimony to current market strength and lower forward expectations. February traded at €700/t yesterday, and March at €675/t, €5/t and €25/t higher than today.

Most spot business is being concluded for April-June at present, with mills offering over €700/t for the most part, and buyers have paid this level for physical quarterly contracts. This makes the €630/t Q2 futures trade a very attractive price for buyers wishing to lock in for second-quarter bookings. Even cheaper imports, offered mostly for late in the second quarter, are currently substantially above this level. Argus' underlying northwest EU HRC index was €710.50/t yesterday, while cold-rolled prices are closer to €800-820/t.

Lower forward pricing is unsurprising given the softening in scrap and Asian prices, and the increase in import offers. It could also be factoring in the potential for the European safeguard lapsing in June, although some European member states are pushing for a review and extension.

By Colin Richardson