FUTURES WRAP: LME scrap contracts fall heavily, trading volumes increase

Near term scrap futures contracts on the London Metal Exchange saw heavy declines over the week to June 16, while the trading volumes increased week on week.

Platts, part o S&P Global Commodity Insights, assessed the June contract down $31/mt over the week to $388.50/mt on June 16, while the July contract fell $51.25/mt to $365/mt. The August contract fell $55/mt to $364.50/mt, while the September contract dropped $49.50/mt to $371.50/mt.

The backwardated structure over the June-July portion of the forward curve strengthened significantly week on week, suggesting that futures traders expect physical scrap prices to fall sharply in the near term.

The slight contango over the July-August portion of the curve shifted into a slight backwardation, while the contango over the August-September portion of the curve strengthened.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $47/mt week on week to $378/mt CFR Turkey on June 16, amid a lack of noticeable deals.

Several market players said the stand-off between buyers and sellers continued, as their price ideas were too wide apart to match.

A Turkish buyer said he would wait another 10 days before making a fresh scrap purchase, as the market was going down fast. He said scrap import workable levels should be significantly lower than current offers in the market amid a lack of demand for finished products along with a recent sharp decrease in finished product prices.

Weekly LME scrap futures trading volumes over the week to June 16 totaled 106,160 mt, down from 79,270 mt for the week ending June 9.

Near-term rebar futures contracts also saw heavy declines in the week to June 16.

Platts assessed the June contract down $27/mt on week to $697.50/mt, according to S&P Global data. The July contract fell $53.50/mt week on week to $670/mt, while the August contract dropped $55.50/mt to $666/mt. The September contract dropped $44/mt to $675.50/mt.

The backwardation over the June-July portion of the forward curve strengthened significantly over the course of the week, suggesting that futures traders expect prices to fall significantly in the near term.

The backwardation over July-August portion of the curve strengthened slightly, while the backwardation over the August-September portion of the curve shifted into contango.

Turkish physical rebar export prices fell $35/mt week on week to $700/mt FOB on June 16, as buyers continued to hold back amid expectations of lower prices in the near term, driven by softening scrap import levels, while mills have tried to maintain elevated offers amid high energy costs.

"No previous raw material purchase is workable for the current [rebar] prices," one mill source said, but added that mills will need to adapt to the market level somehow.

Rebar futures weekly trading volumes in the week to June 16 on the LME totaled 12,540 mt, down from 2,230 mt for week ending June 9.

The daily outright spread between Turkish export rebar and import scrap was assessed at $322/mt on June 16, up $12/mt week on week.

Elsewhere, Indian scrap futures, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 390 mt in the week to June 16. The contract has seen a total volume of 5,700 mt traded since its launch in July 2021.