FUTURES WRAP: LME scrap contracts fall, trading volumes dip

Most near-term scrap futures contracts on the London Metal Exchange fell over the week to March 17, while trading volumes also decreased.

S&P Global Commodity Insights' Platts assessed the March contract down $25/mt to $624.50/mt on March 17, while the April contract gained $2.50/mt to $637.50/mt. May lost $29.50/mt to $620/mt, while June contract dropped $25.50/mt to $599.50/mt.

The backwardated structure over the March-April portion of the forward curve shifted into contango, suggesting that futures traders expected physical scrap prices to remain firm in the immediate near-term.

The contango over the April-May portion of the curve shifted into backwardation, although contracts over the period maintained elevated levels, while the backwardation over the May-June portion of the curve softened on the week.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) rose $3/mt week on week to $653/mt CFR Turkey March 17, after reaching a record high of $665/mt CFR Turkey March 16.

March 17's price drop followed news of lower-priced Baltic-origin deals in the market, down from a prompt shipment, high quality cargo from Canada sold at sharply higher levels earlier in the week.

Sources suggested the market was adjusting to a new normal for HMS 1/2 (80:20), with the premium for shred and PNS over HMS 1/2 (80:20) in cargoes widening to $25-$35/mt, up from $20/mt in recent months.

"We see a massive premium is being now paid for higher yield grades [referring to the March 14 ex-Canada sale] due to shortages in other products and the cargo composition is also playing a bigger role in the price," one UK trader said, adding that recyclers with less cash flow may have to accept relatively lower prices.

"I will not expect any price increase [for scrap] until the mills have firm inquiries for finished products," one Turkish agent source said.

Weekly LME scrap futures trading volumes over the week to March 17 totaled 74,250 mt, down from 175,390 mt last week.

Most near-term rebar futures contracts also saw losses over the week to March 17.

S&P Global's Platts assessed the March contract down $11/mt week on week to $904.50/mt, while the April contract dipped $1.50/mt to $924/mt. May rose $15/mt to $930/mt, while June lost $11/mt to $869.50/mt.

The contango over the March-April portion of the forward curve strengthened over the week, while the backwardation over the April-May portion of the curve shifted into a contango, suggesting that futures traders expect prices to increase for physical rebar in the near-term.

The backwardation over the May-June portion of the curve strengthened.

Turkish physical rebar export prices rose $15/mt on the week to $945/mt FOB March 17, as mills remained firm at elevated levels while demand became active with the European Commission's decision to ban steel imports from Russia and redistributing Russian quota volumes among other countries that fall under the EC's safeguard quotas during the week – including Turkey.

The market heard various deals for shipments ranging between 5,000-10,000 mt booked for Norway, Denmark, Estonia, Latvia and Poland during the week. Meanwhile, some market sources noted that current Turkish rebar prices were too high for export markets like the Far East so demand was not as strong as it should be.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 40,800 mt, down from 56,180 mt on March 17.

The daily outright spread between Turkish export rebar and import scrap was assessed at $292/mt March 17, up $12/mt week on week.

Elsewhere, the LME Indian scrap futures contract, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 330 mt by March 17, down from 360 mt traded last week. The contract has seen a total volume of 3,930 mt traded since its launch in late July 2021.