FUTURES WRAP: LME scrap, rebar contracts fall, trading volumes surge

Scrap and rebar futures contracts on the London Metal Exchange fell over the week to June 24 while trading volumes increased.

S&P Global Platts assessed the June scrap contract down $10/mt on the week to $499.50/mt June 24, while the July contract dropped $14.50/mt to $504.50/mt. The August contract also lost $23/mt on the week to $491.50/mt, with September down $13.25/mt at $492/mt.

The forward curve contango structure for the June-to-July portion of the curve also continued to soften on the week, suggesting that futures traders still expect near-term strength in the physical market albeit at slightly lower levels. The forward curve for the July-to-August contracts displayed a strengthening backwardation structure on the week, while the August-to-September contracts shifted into a slight contango.

Physical scrap prices rose June 24 on a fresh reported deal, after softening earlier in the week, as deepsea ferrous scrap suppliers remained firm on their offers to Turkey, despite little enthusiasm from buyers. A new US-origin sale suggested that the market kept stable, closer to asking prices.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) inched down $1/mt on the week to $499/mt CFR Turkey June 24.

An agent said this week was quiet for trade but demand was accumulating, with new August shipment bookings expected to happen soon. He added that the availability of scrap, particularly from Europe, was tighter because of a strong domestic market. It was better to sell in Europe, where German mills were paying Eur410/mt ($489/mt), without having to pay extortionate freight costs to Turkey, the agent said.

Weekly scrap futures trading volumes over the week to June 24 totaled 41,330 mt, up sharply on 18,010 mt last week and reaching its highest level since May 27's 52,080 mt.

Rebar futures also dropped on the week, in line with scrap. The contango structure for the forward curve over the June-to-July contracts strengthened slightly, while the July-to-September contracts shifted into an almost flat curve, highlighting future traders' expectations that prices might strengthen in the near term, but may remain stable during the third quarter.

Platts assessed the June contract down $10/mt at $729.50/mt June 24, while July dropped $6/mt on the week to $734.50/mt. August dipped $6/mt to $734.50/mt and September fell $10/mt to $734.50/mt.

Turkish physical rebar export prices declined $5/mt on the week to $725/mt FOB June 24, as sources continued to report weak demand in the export market. They largely cited higher tradable values for the European market, given high domestic rebar prices there, but lower workable levels were possible for other markets. Some mills looked for demand from the Far East during the week which could help boost sentiment.

The daily outright spread between Turkish export rebar and import scrap was assessed at $226/mt June 24, down $4/mt on the week.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 5,740 mt, soaring from 780 mt recorded last week and the highest level since the week ending June 10, when volumes were 17,760 mt.