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FUTURES WRAP: LME scrap contracts see strong gains

Highlights

Scrap and rebar trading volumes dip on week

LME rebar contracts also see weekly gains

Near-term scrap and rebar futures contracts on the London Metal Exchange saw strong gains over the week to Aug. 11, while weekly trading volumes dipped.

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Platts, part of S&P Global Commodity Insights, assessed the August contract up $32.50/mt on the week to $397/mt Aug. 11. The September contract gained $14.50/mt on the week to $394.50/mt, while the October contract jumped $19/mt to $396.50/mt. The November contract gained $11/mt to $391.50/mt.

The assessed range of the near-term forward curve out from August to November narrowed sharply and shifted into a soft backwardation, suggesting some futures traders expect near-term physical prices to slightly soften in the near term, albeit remaining at higher levels.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) rose $33/mt week on week to $398/mt CFR Turkey on Aug. 11 amid mill restocking, but mills resisted higher indicative offers at $400/mt CFR and above from sellers on Aug. 11.

"There is psychological anxiety above $400/mt CFR, so it's not possible, and this will make recyclers sell below [$400/mt CFR]," a Turkish agent source said. "Although, some recyclers think prices will be higher in September as they can't collect."

Weekly LME scrap futures trading volumes over the week to Aug. 11 totaled 69,460 mt, down from 202,280 mt for the week ending Aug. 4.

Near-term rebar futures contracts also saw strong gains on the week to Aug. 11.

Platts assessed the August contract up $17/mt to $652/mt. The September contract gained $23.50/mt on the week to $658.50/mt, while the October contract jumped $28/mt to $663.50/mt. The November contract increased $19.50/mt to $656/mt.

The August-October portion of the forward curve shifted into a slight contango from a largely flat structure, suggesting that futures traders expected prices to increase in the physical market in the near-term.

The slight contango structure over the October-November portion of the curve shifted into backwardation on the week.

Turkish physical rebar export prices increased $30/mt on the week to $660/mt FOB Aug. 11, as Turkish mills raised offer levels for rebars in the export market amid strong scrap prices despite weak demand.

One Marmara mill source put his mill offer for export rebar at $670/mt FOB on Aug. 11, adding that they were waiting for Aug. 15 to have a better idea of the market.

"For now, everybody is just offering," the source said. "Anyway, according to the scrap prices, we have to increase our final product prices too."

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 6,310 mt, down from 11,670 mt for week ending Aug. 4.

The daily outright spread between Turkish export rebar and import scrap was assessed at $262/mt Aug. 11, down $3/mt on the week.

Elsewhere, Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 60 mt in the week to Aug. 11. The contract has seen a total volume of 7,020 mt traded since its launch in late July 2021.