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FUTURES WRAP: Near-term LME scrap contracts dip on week, contango strengthens

Highlights

Most rebar futures contracts gain on week

Near term contango for scrap forward curves strengthen

Near-term scrap futures contracts on the London Metal Exchange weakened slightly over the week to Sept. 30, while the near term contango strengthened.

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S&P Global Platts assessed the September scrap contract down $4/mt week on week to $440/mt on Sept. 30, while the October contract decreased $1/mt on the week to $445.50/mt. The November contract gained 75 cents/mt on the week to $442.50/mt, and the December contract rose $2.50/mt on the week to $443/mt.

The contango structure for the September-October portion of the forward curve strengthened slightly on the week, suggesting that futures traders expect that physical prices might strengthen in the near-term. The backwardated structure of the October-November portion of the curve weakened, while the backwardated November-December portion of the LME scrap forward curve shifted into a slight contango.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) temporarily dropped to $433/mt CFR Sept. 24, before recovering over the week to $436/mt CFR Turkey on Sept. 30. This was down $4/mt on the week from Sept. 23. The market saw a flurry of bookings as mills returned to book at weakened levels. Turkish steel mills were active in the market for November shipment cargoes, resulting in a number of new deepsea trades.

A Turkish steel producer highlighted an issue with the poor end-user demand for finished products in Turkey, denting the outlook for scrap. He saw the current scrap market moving sideways. "I think the US-origin deals are critical to find out the trend, so next week we will see better," he added.

The daily outright spread between Turkish export rebar and import scrap was assessed at $224/mt Sept. 30, down $2.50/mt on the week.

Weekly LME scrap futures trading volumes over the week to Sept. 30 totaled 44,880 mt, down from 75,780 mt recorded last week.

For rebar futures, the contango structure of the September-October portion of the forward curve strengthened on the week, suggesting that futures traders expect that near term rebar prices might strengthen.

The backwardated October to November portion of the curve also shifted into a contango structure, while the backwardated structure of the November-December portion of the curve strengthened.

Platts assessed the September contract down 25 cents/mt on the week to $665.25/mt on Sept. 30, while the October contract increased $5/mt on the week to $675/mt. The November contract rose $10/mt to $679/mt on the week, and the December contract gained $7/mt to $674/mt.

Turkish physical rebar export prices dropped $6.50/mt on the week to $660/mt FOB on Sept. 30, as a lack of noticeable demand in the Turkish exported rebar market kept pressure on prices.

One UK trader noted that tradable levels for Turkish exported rebar currently vary depending on the mills. "I think the market is a bit confused. None of [the products' prices] are up or down, it is rangebound," he told Platts.

"Negative sentiment is also going around; It is normal for negative sentiment to brew when nothing is happening. I have to emphasize, in the next six months we should not talk about the market in general as negative or positive, it will depend on specific products."

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 21,760 mt, down from 25,790 mt traded volume last week.