FUTURES WRAP: LME scrap contracts see strong gains, trading volumes increase

Most near-term scrap and rebar futures contracts on the London Metal Exchange saw strong gains over the week to Feb. 10, while trading volumes also rose.

S&P Global Platts assessed the February scrap contract up $11/mt to $506/mt Feb. 10, with March rising $12.75/mt to $507.75/mt. The April contract gained $12.50/mt to $500/mt, while May fell $15.50/mt to $469.50/mt.

The forward curve over the February-March contracts shifted to a soft contango from a flat structure on the week, suggesting that futures traders expected physical scrap prices to strengthen in the immediate near term. The backwardation over the March-May portion of the curve strengthened on the week to Feb. 10.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 jumped $13.50/mt week on week to $505.50/mt CFR Turkey Feb. 10, amid fresh deals, though demand for finished steel remained weak. However, market participants expected prices to increase in the near term.

"We're assuming Turkey has around 350,000-400,00 mt to buy [on the deepsea market] and it's Feb. 10 so mills have time to finish up [finished steel] orders and book more rebar sales before buying further scrap," a UK recycler said.

"I think we will see $510/mt CFR soon -- mills are begging for material," a trading source said.

Weekly LME scrap futures trading volumes over the week to Feb. 10 totaled 89,790 mt, up from 86,940 mt the previous week, to reach the highest weekly trading volume total since early October.

Near-term rebar futures contracts also saw strong gains over the week to Feb. 10. Platts assessed the February contract up $7.50/mt on the week to $745.50/mt, while March rose $13/mt to $748.50/mt, April gained $13/mt to $737.50/mt, and May jumped $20.50/mt to $740.50/mt.

The backwardated structure over the February-March portion of the forward curve shifted into a soft contango over the week, suggesting that futures traders expect prices to increase in the near term.

The backwardation over the March-April portion of the curve was unchanged on the week albeit at a higher level, while the backwardation over the April-May portion of the curve shifted into a contango.

Turkish physical rebar export prices increased $10/mt on the week to $735/mt FOB Feb. 10, as mills remained firm at elevated levels amid high costs, but demand for Turkish rebar remained weak in the export market.

"The market is up, scrap is up but nobody is buying finished products," one Turkish trader said. There are very limited markets that are currently purchasing finished products from Turkey like Israel and Yemen, while no sales were being heard to the Far East and Latin American markets, the source noted, adding that prices are expected to move lower in the first week of March at the latest.

Rebar futures weekly trading volumes on the London Metal Exchange totaled 50,280 mt Feb. 10, sharply up on 12,780 mt the previous week. Trading volumes during the week to Feb. 10 reached the highest weekly trading volume total since June 2019.

The daily outright spread between Turkish export rebar and import scrap was assessed at $229.50/mt Feb. 10, down $3.50/mt week on week.