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FUTURES WRAP: LME scrap, rebar contracts move into near-term contango

Highlights

Near-term rebar contracts see sharp gains on week

Weekly trading volumes increase

Most near-term scrap and rebar futures contracts on the London Metal Exchange saw strong gains over the week to Jan. 6 as the new year began, while weekly trading volumes increased.

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S&P Global Platts assessed the January contract stable at $460/mt Jan. 6, while the February contract rose $12.50/mt week on week to $463.50/mt. The March contract jumped $15/mt to $460/mt.

The backwardated structure for the January-February portion of the forward curve shifted into a slight contango week on week, suggesting that futures traders expect near-term prices to strengthen. The backwardation over the February-to-March portion of the curve softened, suggesting that futures traders expected 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 $2.25/mt week on week to $465.25/mt CFR Turkey on Jan. 6, following two fresh US-origin deals.

With most of their February shipment requirements still to be bought, mills were looking to resist higher prices, but sellers were staying firm. "Now the demand is good from the mills, there are not many offers from the seller side -- I think we can see an increase on the prices soon," one Turkish agent source said.

"Sellers are not rushing to offer," a US recycler said. "Turkey has basically nothing bought for February."

Weekly LME scrap futures trading volumes over the week to Jan. 6 totaled 28,130 mt, up from 25,600 mt the previous week.

Near-term rebar futures contracts also saw significant gains over the week to Jan. 6. Platts assessed the January contract up $14.50/mt at $700/mt. The February contract jumped $25/mt to $700.50/mt, with March up $27/mt to $694.50/mt.

The strong backwardation over the January-February portion of the forward curve shifted to a very slight contango week on week, suggesting that futures traders expected near-term physical prices to strengthen. The backwardated structure over the February to March portion of the curve softened on week.

Turkish physical rebar export prices gained $10/mt to $700/mt FOB on Jan. 6, amid high costs despite a slow start to the year, demand-wise.

Market reported strong hikes in energy prices in Turkey as the year started. The Energy Market Regulatory Authority announced Jan. 1 a jump of 125% in electricity prices for high-demand commercial users. In addition, Turkey's state natural gas importer Botas hiked wholesale gas prices for major industrial consumers by 50% as of Jan. 1.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 6,100 mt, double 3,030 mt the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $234.75/mt Jan. 6, up $7.75/mt week on week.

Elsewhere, LME Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap index, traded 60 mt over the week to Jan. 6. The future contracts saw a total volume of 2,910 mt traded since its launch in late July 2021.