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FUTURES WRAP: LME scrap, rebar contracts jump on week, weekly trading volumes surge

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FUTURES WRAP: LME scrap, rebar contracts jump on week, weekly trading volumes surge

Highlights

Scrap, rebar weekly trading volumes at over 4-month high

Near-term contango for scrap, rebar forward curves strengthen

Scrap and rebar futures contracts on the London Metal Exchange jumped over the week to Oct. 7, while the weekly trading volumes surged

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S&P Global Platts assessed the October contract up $20.50/mt on the week to $466/mt Oct. 7. The November contract jumped $37/mt on the week to $479.50/mt, and the December contract increased $35/mt to $478/mt.

The backwardated structure for the October-November portion of the forward curve shifted into a strong contango on the week, suggesting that futures traders expect significant increases in scrap prices in the near term. The slight contango for the November-December portion of the curve shifted into a soft backwardation.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) rose $19/mt on the week to $455/mt CFR Turkey Oct. 7, as the market reported a flurry of bookings at strengthened levels.

"Mills are trying to go long to secure their raw materials costs and supply ahead of the winter period, when energy costs will be very uncertain," a UK trader said.

"There are not so many scrap offers, and most Turkish mills are under stress -- some need October shipment cargoes, and some need November shipment, but they need to pay the price," one mill source said.

Weekly LME scrap futures trading volumes over the week to Oct. 7 totaled 92,320 mt, up from 44,880 mt recorded last week, reaching its highest level since the week ending May. 20.

For near-term rebar futures, the contango structure of the October-to-November portion of the forward curve strengthened significantly on the week, continuing to suggest that futures traders expect strong near-term physical rebar prices. The backwardated structure of the November-to-December portion of the curve also strengthened on the week, albeit it at elevated levels.

Platts assessed the October contract up $20.50/mt on the week to $695.50/mt Oct. 7. The November contract rose $31.50/mt to $710.50/mt and December gained $26.50/mt to $700.50/mt.

Turkish physical rebar export prices rose $12.50/mt on the week to $672.50/mt FOB Oct. 7, as mills raised offers and workable levels amid strengthening scrap prices, despite limited demand for rebar in the export market. Sources noted that domestic rebar demand is much stronger than exports, with mills selling rebar in the local market around $675-$680/mt ex-works during the week.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 40,950 mt, the highest weekly trading volumes since May 27, and up from 21,760 mt traded volume last week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $217.50/mt Oct. 7, down $6.50/mt on the week.

Indian containerized shredded scrap futures weekly trading volumes this week on the London Metal Exchange totaled 210 mt, trading for three consecutive days for the first time over Oct. 4-6.

A total of 450 mt have traded so far on the contract, which settles basis the Platts CFR Nhava Sheva shredded scrap index monthly average, since its launch in late July 2021.