The SMU/Steel Reality Fair Value Index HRC model showed spot HRC pricing below fair value for the third week in a row. With the SMU average spot HRC price falling $5/ton last week and scrap inputs remaining the same, the model moved fair value further into negative territory by $21/ton. Historical data from the model suggests that the spot HRC price can stay below fair value for several weeks before changing course. Based on our scrap sources we anticipate a major move lower in scrap by early in June which will impact our Fair Value model.
As a reminder, the Fair Value HRC model below came from the SMU acquisition of Steel Reality. The graph below demonstrates the relationship between scraps inputs creating an estimated “fair value” for HRC versus the actual spot price.
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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