FUTURES WRAP: LME scrap contracts see losses but shifts to soft near-term contango

Near term scrap futures contracts on the London Metal Exchange saw strong losses over the week to June 9, while the trading volumes decreased on the week.

S&P Global Commodity Insights' Platts assessed the June contract down $30.50/mt over the week to $419.50/mt on June 9, while the July contract decreased $28.75/mt to $416.25/mt. The August contract fell $22.50/mt on the week to $419.50/mt, while the September contract dropped $19/mt to $421/mt.

The backwardated structure over the June-July portion of the forward curve slightly softened on week, suggesting that futures traders continued to expect physical scrap prices to soften in the near-term but the expectation might be less firm.

The backwardation over the July-September portion of the curve shifted into a slight contango, suggesting some expectations of a near-term floor in the physical market over June.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $10/mt week on week to $425/mt CFR Turkey on June 9, as Turkish buyers continued to hold back from deepsea purchasing.

"Most of the sellers in Europe and the US keep waiting for now," a Turkish agent source said, while one UK recycler noted that "those who needed to sell have sold, so in the UK and EU, there's no glut of material."

Weekly LME scrap futures trading volumes over the week to June 9 totaled 79,270 mt, down from 142,220 mt for the week ending June 1.

Near-term rebar futures contracts saw a mixed trend over the week to June 9.

Platts assessed the June contract down $14/mt on week to $724.50/mt. The July contract gained $3.50/mt on week to $723.50/mt, while the August contract decreased $1.50/mt to $721.50/mt on week to June 9. The September contract increased $4.50/mt to $719.50/mt.

The backwardation over the June-July portion of the forward curve softened significantly over the week, suggesting that futures traders continued to expect prices to lower in the near-term but that this expectation might be less firm.

The contango over July-August portion of the curve shifted into a slight backwardation, while the backwardation over the Aug-Sept portion of the curve softened.

Turkish physical rebar export prices fell $10/mt on week to $735/mt FOB on June 9, as buyers continued to hold back amid expectations for lower prices in the near term while mills tried to maintain elevated levels.

"Inflation and financial pressure are affecting customer sentiment," a UK trader said. Cheap supply of billets and slabs from Russia were also affecting prices by allowing some mills to produce steel products at lower costs, according to the trader.

"But demand is the main issue today," the UK trader said. "It is a buyers' market today not sellers'...But I think once demand is back, we will see significant increase in rebar prices."

Rebar futures weekly trading volumes in the week on the LME totaled 2,230 mt on June 9, down from 46,260 mt for week ending June 1.

The daily outright spread between Turkish export rebar and import scrap was assessed at $310/mt June 9, stable on week.