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FUTURES WRAP: LME scrap contracts rise, weekly trading volumes jump

Highlights

Most near-term rebar contracts also gain

Weekly trading volumes increase

Near-term scrap futures contracts on the London Metal Exchange saw significant gains over the week to Jan. 13, while weekly trading volumes also jumped.

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S&P Global Platts assessed the January contract up $8.50/mt on the week to $468.50/mt on Jan. 13, while the February contract rose $1/mt week on week to $464.50/mt. The March contract jumped $7/mt to $467/mt, while the April contract increased $4.50/mt to $460.50/mt.

The contango structure for the January-February portion of the forward curve shifted into backwardation, while the backwardation over the February-March portion of the curve shifted into a contango, before reverting back into backwardation over March-April.

The lack of clear direction over the Q1 2022 forward curve suggests futures traders are uncertain over near-term price direction for physical prices of Turkish scrap.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 gained $4.75/mt week on week to $470/mt CFR Turkey on Jan. 13, having reached a peak of $472.50/mt CFR on Jan. 11 following a flurry of bookings. Mills and recyclers expect further market activity around current prices of around $470/mt CFR Turkey.

"Scrap prices may be flat or even creep up a bit, as on the sales side [rebar] prices are creeping up a bit -- previously we were around $685-$690/mt FOB and now it's mostly $700/mt FOB," one Turkish mill source said.

Weekly LME scrap futures trading volumes over the week to Jan. 13 totaled 59,230 mt, up from 28,130 mt the previous week to reach the highest total since Oct. 21, 2021, when weekly trading volumes totaled 68,970 mt.

Most near-term rebar futures contracts also saw some gains over the week to Jan. 13. Platts assessed the January contract stable at $700/mt. The February contract jumped $7.50/mt to $708/mt, and the March contract rose $4/mt week on week to $698.50/mt. The April contract fell $11/mt to $684.50/mt.

The contango structure over the January-February portion of the forward curve strengthened week on week, suggesting that futures traders' expectation of further upside in prices in the immediate near-term is firmer.

The backwardated structure over the February to March portion of the curve strengthened, while the slight contango over the March-April portion of the curve shifted into a strong backwardation, suggesting that futures traders expect some downside to physical prices over the February-April period.

Turkish physical rebar export prices were stable over the week to Jan. 13 at $700/mt FOB, as market sources reported multiple bookings to the US, Canada, Chile and the UK at similar levels. Some market sources are expecting upside to near-term physical rebar prices.

"An upward sentiment is dominant these days," one trading source told Platts. "Demand has started this week and we will see how it will carry on. We will also have to see how sales come in from Israel, Yemen and Sudan," he said.

Rebar futures weekly trading volumes on the London Metal Exchange totaled 11,580 mt, up from 6,100 mt the previous week and the highest weekly trading volume total since Dec. 17-23, 2021, when 13,930 mt was traded.

The daily outright spread between Turkish export rebar and import scrap was assessed at $230/mt Jan. 13, down $4.75/mt week on week.