FUTURES WRAP: LME scrap, rebar contracts see strong losses on week

Near-term scrap futures contracts on the London Metal Exchange saw strong losses over the week to April 21, while the trading volumes also dipped on the week.

S&P Global Commodity Insights' Platts assessed the April contract down $11/mt at $619.50/mt on April 21. The May contract lost $14.50/mt to $590/mt, while the June contract fell $19/mt to $580/mt. The July contract dropped $39.50/mt to $550/mt.

The backwardated structure over the April-May portion of the forward curve strengthened on the week, suggesting that futures traders on April 21 continued to expect physical scrap prices to soften in the near-term.

The backwardation over May-July portion of the forward curve strengthened significantly for the June-July portion of the curve, as futures traders expected sharply lower physical prices into the summer months.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) decreased $25/mt week on week to $615/mt CFR Turkey on April 21, as most mills continued to hold back from buying further May shipment cargoes.

"Scrap recyclers think Turkish mills will need to buy 15-20 cargoes of scrap [for May shipment], but a lot of the larger mills are buying Russian billet instead to fulfil their needs," one Turkish mill source said. Workable levels for Russia-origin billet into Turkey were sharply below other origins, adding to downward pressure on overall scrap price sentiment.

"I expect the prospect of secondary sanctions to make further constraints on the relatively small volume of Russian billets which has been dampening sentiment," a European recycler source said.

Weekly LME scrap futures trading volumes over the week to April 21 totaled 12,450 mt, down from 38,210 mt last week, amid a shorter trading week due to the Easter holidays.

Most near-term rebar futures contracts also saw strong losses over the week to April 21.

S&P Global Commodity Insights' Platts assessed the April contract flat on the week at $939.50/mt. The May contract fell $51/mt to $869.50/mt, while the June contract lost $47/mt to $858.50/mt. The July contract dropped $52/mt to $848.50/mt.

The backwardation over the April-June portion of the forward curve strengthened over the week, suggesting that futures traders still expect prices to soften in the near-term.

The backwardated structure over the June-July portion of the curve was largely unchanged.

Turkish physical rebar export prices fell $22.50/mt on the week to $927.50/mt FOB on April 21, as continuously weak demand in the export as well as domestic markets kept pressure on prices.

Overall demand in the export market was slow as most European buyers held back after the safeguard import quota for the current April-June period exhausted. Meanwhile, Turkish rebar export offers were deemed too high to be workable for other export destinations, leading to a clear disconnect between expected tradable levels between EU and non-EU markets.

The ongoing Islamic holy month of Ramadan also put pressure on the domestic and export demand from regular, non-European markets.

Rebar futures weekly trading volumes during the week on the London Metal Exchange totaled 630 mt on April 21, down from 900 mt the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $312.50/mt April 21, up $2.50/mt week on week.