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FUTURES WRAP: LME scrap contracts still falling; weekly trading volumes surge

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FUTURES WRAP: LME scrap contracts still falling; weekly trading volumes surge

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Rebar weekly trading volumes at an almost 4-month high

Near term contango for scrap, rebar forward curves strengthen

Scrap futures contracts on the London Metal Exchange saw further losses over the week to Sept. 9, while weekly trading volumes surged.

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S&P Global Platts assessed the September scrap contract down $5/mt week on week to $445.50/mt Sept. 9, while the October contract dipped $2.50/mt to $451.50/mt. The November contract lost $6.50/mt on the week to $447.50/mt, and December contract dropped $4.50/mt to $445/mt.

The contango structure for the September-October portion of the forward curve strengthened slightly on the week, suggesting that futures traders expect physical prices might strengthen in the near term, though maintaining softened levels. The October-November portion of the curve shifted into backwardation and the backwardated structure of the November-December portion of the LME scrap forward curve softened slightly on the week.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dipped $2.50/mt on the week to $442.50/mt CFR Turkey Sept. 9, amid uncertainty of future price direction for scrap and finished steel products.

"Inflow [of scrap to yards] is still not good at lower prices, so I hope no one will be under pressure to sell," one EU recycler said.

Weekly LME scrap futures trading volumes over the week to Sept. 9 totaled 63,400 mt, the highest weekly volume since the week ending Aug. 5, up from 23,950 mt recorded last week.

For near-term rebar futures, the contango structure of the September-October portion of the forward curve strengthened on the week in line with scrap, while the October-December portion of the curve shifted into backwardation. This suggests futures traders' expectations that physical rebar prices may stabilize in the near term, before softening over the fourth quarter.

Platts assessed the September contract up $1.25/mt on the week to $672.50/mt Sept. 9, while October gained $5/mt to $680/mt. The November contract was flat at $675/mt and December dipped $3/mt to $672/mt.

Turkish physical rebar export prices inched down 50 cents/mt on the week to $667/mt FOB Sept. 9 as continued lack of demand maintained pressure on rebar export workable levels, though market sentiment was more positive amid mixed expectations that freight rates might come down in the near term.

"There is a positive sentiment in the market this week," one Turkish trader said. "Freight rates might come down, especially for bulk shipments for October and November. But it is not trustworthy as I am talking with a lot of shipping companies and there is no guarantee that freight rates will go down."

Another Turkish trader highlighted low demand. "There are no inquiries in the market today. So even if you do buy, which you might be able to do [at] $5-$10/mt less than [mill offers]...who are you going to sell it to? There are no buyers."

The daily outright spread between Turkish export rebar and import scrap was assessed at $224.50/mt Sept. 9, up $2/mt on the week.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 18,930 mt, the highest recorded weekly trading volumes since May 27, up from 1,110 mt of traded volume last week.