FUTURES WRAP: LME scrap contracts see losses, trading volumes dip

Most near-term scrap and rebar futures contracts on the London Metal Exchange saw losses over the week to Feb. 17, while trading volumes decreased.

S&P Global Platts assessed the February scrap contract down $1.50/mt to $504.50/mt, and the March contract $9.75/mt lower to $498/mt on Feb. 17. The April contract fell $10/mt to $490/mt, while the May contract gained $15/mt to $484.50/mt.

The forward curve over the February-March contracts reverted to backwardation from a contango structure the previous week, suggesting that futures traders expect physical scrap prices to weaken in the immediate near term.

The backwardation over the March-April portion of the curve became stronger on the week, while the strong backwardation over the April-May portion of the curve was less firm.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 increased $1.50/mt week on week to $507/mt CFR Turkey on Feb. 17, as steelmakers paused their purchases and were focused on sales of finished products.

One trading source noted that scrap demand for April shipments would depend on steel sales in the near term, saying that scrap prices might go up if finished steel sales increase and most mills return to buy scrap at the same time. It is also possible that scrap pricing keeps in the $500-$510/mt CFR range, the trader added. He doubted prices would soften as Turkish importers would be looking actively for April scrap shipments to keep steel output at a healthy level and be ready for better demand in the spring.

Weekly LME scrap futures trading volumes over the week to Feb. 17 totaled 73,870 mt, down from 89,790 mt the previous week.

Near-term rebar futures contracts saw strong losses over the week. Platts assessed the February contract down $6/mt to $739.50/mt. The March contract fell $14/mt week on week to $734.50/mt, and the April contract lost $11/mt to $726.50/mt. The May contract dropped $22/mt to $718.50/mt.

The contango structure over the February-March portion of the forward curve shifted back into backwardation over the week, suggesting that futures traders expect prices to decrease in the physical market in the immediate near-term.

The backwardation over the March-April portion of the curve was less firm on the week, while the contango over the April to May portion of the curve shifted into backwardation.

Turkish physical rebar export prices increased $7.50/mt week on week to $742.50/mt FOB on Feb. 17, as mills remained firm at elevated levels amid high costs, but demand for Turkish rebar continued to be slow in the export market.

Mills were heard to be holding back from trying to sell large rebar volumes in the export market, one trader told Platts. "I don't expect them to be under pressure, either, because they already sold good volumes [over the past few weeks]. If they don't sell anything by early March, then they will be under pressure," he said.

Rebar futures weekly trading volumes on the London Metal Exchange totaled 20,450 mt in the week to Feb. 17, down from 50,280 mt the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $235.50/mt Feb. 17, up $6/mt week on week.