Traders are contemplating buying European hot-rolled coil (HRC) futures and selling US paper, in the steel market’s own ‘blue-wave’ trade.
The rationale is that in the event of Joe Biden winning the US presidency, he will repeal or dilute the Section 232 tariff on imported steel imposed by incumbent Donald Trump.
The European buy could be helped should the European Commission impose provisional dumping duties on Turkey. However, consensus is building around a high single-digit provisional duty. Some say this could provide more downside than upside, while others expect it to support European pricing. The commission will soon announce that Turkish imports will be subject to registration, meaning they can be hit with retroactive duties in the event that dumping is proven.
Some question whether tinkering with trade policy will be high on Biden’s agenda should he win the election, as other issues, such as Covid-19, are likely to take precedence.
On US exchange operator CME Group’s US HRC contract, the forward curve was softening from April onwards: April was down by $9/st at $633/st, while May and June were off $6/t and $10/t, respectively. July, August and September were off $8/st, $2/st and $7/st. The curve, which settles against CRU’s weekly US index, was backwardated from May until October.
The EU contract, which settles against Argus‘ daily northwest EU HRC index, was little changed at time of publication. February nudged up by €2/t to €516/t, while March was up by €3/t to €508/t.