BHP today reinforced expectations that the current strength in steel demand will extend into 2021. Earlier in the week it was a roundtable with Morgan Stanley and now UBS (Bloomberg). The reiterating of the message seems to be sinking in, with the December contract trading up to a new high of USD 127.64, whilst the DCE is now trading above the CNY 900 level. Steel margins continue to remain firm and with the positive view from BHP it would suggesting downside moves are likely to be corrective, rather than bearish at this point.
An early push in capes failed to hold above the USD 14k level in the December futures contracts. Thanksgiving in the states resulted in a a relatively tight range in the capes with the Dec closing 0.5% lower at USD 13,675 whilst the Q1 was 1.2% lower at USD 8,300 and the Cal unchanged on the day. However, the futures market itself was busy with volume trading on the deferred out to Dec 25, tight in range but busy on the back end of the curve for the second consecutive day.
Like the Capes, early upside moves failed to hold with the market seemingly in an accumulation/distribution phase in the front month, high volumes in the previous two days with little price momentum opens up the possibility of a volatility snap in either direction once the directional bias is set. The technical implies lower pricing, with upside moves once again failing to hold; however, paper is supporting the downside tests with the Dec futures finishing the day USD 25 lower at USD 10,775. This is turning it a stalemate and a time play; the longer price holds at these levels the higher the chance of a wave extension. Q1 futures finished the session -1.2% at USD 8,475 with the Cal down 0.5% at USD 10,012.
Supramax futures had been strong like a bull for 11 trading days with the December trading to a high of USD 11,050 yesterday. However, today the bear got his own back by swatting the futures down 2.5%, to USD 10,725 on the December contract. Swatting might be a bit strong, as in reality they followed the Panamax lower when it moved off its highs. The backs were far more stable with the Q1 futures 0.6% lower to USD 8,300 with the Cal 21 unchanged at USD 9,225.
I promised an oil report today but unfortunately, I have run out of time. Brent Futures came under pressure early in the European session and never really recovered. The futures are currently corrective with a near-term downside support between USD 46.52 – USD 44.83. There is still room for another push to the upside, providing the corrective moves stays above the USD 44.83 level.
Happy Thanksgiving
Data source FIS and Bloomberg
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