Posted on 27 Jun 2022
Near-term scrap futures contracts on the London Metal Exchange continued to see strong losses over the week to June 23, while the trading volumes increased week on week.
Platts assessed the June contract down $13/mt over the week to $375.50/mt June 23, while the July contract decreased $20/mt to $345/mt. The August contract fell $14.50/mt week on week to $350/mt, while the September contract dropped $16/mt to $355.50/mt.
The backwardated structure over the June-July portion of the forward curve strengthened on the week, suggesting that futures traders continued to expect physical scrap prices to fall sharply in the near term.
The slight backwardation over the July-August portion of the curve shifted into a contango, suggesting some expectation of a stabilization or recovery in the physical price later into the year’s third quarter. The August-September portion of the curve remained in a contango structure but weakened slightly week on week.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $58/mt week on week to $320/mt CFR Turkey June 23, after activity was heard at lower levels as oversupply continued to weigh on prices.
“There are still aggressive sellers in the market, but mills have a large margin, so they can sacrifice from the margin,” one mill source said.
Weekly LME scrap futures trading volumes over the week to June 23 totaled 136,840 mt, up from 106,160 mt for the week ending June 16 to reach the highest weekly trading volume since March 1.
Near-term rebar futures contracts also saw strong losses on the week to June 23.
Platts assessed the June contract down $6/mt on week to $691.50/mt. The July contract fell $35/mt week on week to $635/mt, while the August contract lost $31.50/mt to $634.50/mt week on week to June 23. The September contract dropped $40/mt to $635.50/mt.
The backwardation over the June-July portion of the forward curve strengthened significantly over the week, suggesting that futures traders were firmer on their expectations of prices to significantly decline in the near term.
The forward curve formed a largely flat structure over the July-September portion of the curve, highlighting the uncertainty of futures traders regarding the physical rebar demand situation toward the end of the summer.
Turkish physical rebar export prices fell $40/mt week on week to $660/mt FOB June 23, as buyers continued to hold back amid expectations for lower prices in the near term driven by softening import scrap prices. Sellers tried to maintain minimum workable levels, but buyers were hesitant to accept those prices, sources said.
“Right now, our sales are extremely slow, and prices are already starting to generate negative margins,” one European buyer said. “Things will be tough in the upcoming months.”
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 14,080 mt, up from 12,540 mt for the week ended June 16.
The daily outright spread between Turkish export rebar and import scrap was assessed at $340/mt June 23, up $18/mt week on week.
Elsewhere, Indian scrap futures, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 90 mt on week to June 23. The contract has seen a total volume of 5,790 mt traded since its launch in late July 2021.
Source:Platts
