FUTURES WRAP: LME scrap, rebar contracts remain in backwardation

Near-term scrap futures contracts on the London Metal Exchange remained in backwardation but saw slight gains over the week to July 21, while trading volumes dropped.

S&P Global Commodity Insights' Platts assessed the July contract up $6/mt to $396.50/mt. The August contract gained $2/mt on the week to $370.50/mt, September rose $8.50/mt to $373/mt and October increased $9/mt to $368.50/mt.

The backwardated structure over the July-August portion of the forward curve strengthened on the week, suggesting that futures traders were firmer in their expectation of near-term physical prices softening.

The backwardation over the August-September portion of the curve shifted into a soft contango on the week, while the backwardation over September-October was less firm.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) fell $27.50/mt week on week to $382.50/mt CFR Turkey July 21, as multiple US recycler offers pressured the market. Weak finished steel demand following the Eid al-Adha holiday period in Turkey over July 8-14 prompted Turkish mills to largely pull back from deepsea scrap purchasing

"The price increases before the holidays were already temporary -- all other markets are bad and it looks like this will continue," a Turkish mill source said.

Weekly LME scrap futures trading volumes over the week to July 21 totaled 38,740 mt, down sharply from 178,730 mt for the week ending July 14.

The forward curve structure for near-term rebar futures contracts was unchanged in the week to July 21.

S&P Global Commodity Insights' Platts assessed the July contract stable on the week at $689/mt, while August was firm at $654.50/mt, September was flat at $644.50/mt and October was steady at $634.50/mt.

The backwardation over the July-October portion of the forward curve was also stable, suggesting futures traders were firm in their expectations of prices softening in the near term.

Turkish physical rebar export prices dropped $7.50/mt on week to $692.50/mt FOB on July 21, as demand remained muted following the preceding Eid al-Adha holidays. Even though scrap prices fell during the week, Turkish mills mostly resisted accepting lower prices for possible rebar deals.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 5,380 mt, down from 13,600 mt for week ending July 21.

The daily outright spread between Turkish export rebar and import scrap was assessed at $310/mt July 21, up $20/mt on the week.

Elsewhere, Indian scrap futures, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 240 mt in the week to July 21. The contract has seen a total volume of 6,840 mt traded since its launch in late July 2021.