FUTURES WRAP: LME scrap contracts see strong gains on week

Near-term scrap futures contracts on the London Metal Exchange gained over the week to Dec. 30, while the backwardated structure of the forward curve softened.

Platts assessed the December contract up $3.75/mt week on week at $467.75/mt on Dec. 30. The January contract increased $8.50/mt to $460/mt. The February contract jumped $10.50/mt week on week to $451/mt. The March contract rose $10/mt to $445/mt.

The backwardated structure for the December-March forward curve softened week on week, suggesting that futures traders expect any near-term physical price downtrend over the period to be less drastic than previously anticipated.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 gained $2/mt week on week to $463/mt CFR Turkey on Dec. 30, as scrap import prices remained firm ahead of the New Year holidays as mill interest in late January and February shipments was heard to have intensified.

"We touched the bottom and don't expect lower prices -- Turkish mill scrap inventories are not good, so they need to buy," one agent source said. "No US seller will offer [to Turkey] for now -- they will announce a decrease for their January domestic market -- so they think these export scrap prices can keep up."

Weekly LME scrap futures trading volumes over the week to Dec. 30 totaled 25,600 mt, down from 31,360 mt recorded the previous week.

Most near-term rebar futures contracts saw losses over the week to Dec. 30. Platts assessed the December contract up $4.25/mt week on week at $698.75/mt, while the January contract was stable at $685.50/mt. The February contract dropped $3.50/mt to $675.50/mt, and the March contract fell $7/mt week on week to $667.50/mt.

The backwardated structure of the December-March portion of the forward curve strengthened week on week, suggesting that futures traders expect further near-term downtrend in physical prices.

Turkish physical rebar export prices were stable week on week at $690/mt FOB on Dec. 30, amid a quiet market ahead of the holidays.

One Turkish trader noted that workable levels for mills depend on whether the Turkish mills with large capacities are under pressure to sell. He added that mills will need to reduce their target outright scrap-rebar spread to $225-$230/mt compared to the earlier target of $240/mt and be a bit more aggressive on rebar sales.

Most buyers in the export market showed a lack of interest in Turkish rebar over the past few months, as mills remained firm at higher offers amid strong scrap and energy costs.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 3,030 mt, significantly down from 13,930 mt traded volume the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $227/mt Dec. 30, down $2/mt week on week.

2021 trading volumes

LME scrap trading volumes totaled approximately 1.53 million mt from Jan. 1 to Jun. 30, up from approximately 1.34 million mt in H1 2020. For the second half, scrap contracts traded volumes totaled around 1.14 million mt, compared to approximately 1.46 million mt in H2 2020.

Yearly trading volumes for LME scrap trading contracts totaled approximately 2.67 million mt, compared to around 2.80 million mt in 2020.

Rebar futures trading volumes in the first half of 2021 on the London Metal Exchange totaled 281,520 mt, down from 357,420 mt traded during H1 2020. Rebar trading volumes totaled approximately 266,810 mt from July 1 to Dec. 30, up from 258,270 mt in H2 2020.

Yearly trading volumes for LME rebar trading contracts totaled approximately 548,330 mt, compared to 615,690 mt in 2020.

Elsewhere, Indian scrap futures saw a total volume of 2,850 mt traded by Dec. 30, which settles basis the Platts CFR Nhava Sheva shredded scrap index, since its launch in late July.