Posted on 01 Nov 2021
Near-term scrap futures contracts on the London Metal Exchange saw losses over the week to Oct. 28, on expectations of weaker physical prices in the near term, while trading volumes also fell.
S&P Global Platts assessed the October contract down 75 cents/mt on the week to $480.75/mt on Oct. 28. The November contract fell $7.50/mt on the week to $491.50/mt, while December dropped $4/mt to $486/mt and January was down $15/mt to $475.50/mt.
The contango structure for the October-November portion of the forward curve continued to weaken, suggesting that futures traders’ expectations regarding near-term scrap prices were less firm.
Turkish mills are expected to return in the week starting Nov. 1 to booking their December shipment requirements, following the national Republic Day holiday Oct. 28-29.
The backwardation structure for the November-December portion of the curve also softened on the week, but the slight contango structure for the December-January portion of the curve last week shifted into a strong backwardation this week.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) lost $5.50/mt on the week to $499.50/mt CFR Turkey Oct. 28, as market activity slowed during the holiday market Oct. 28-29, with market sources expecting prices to soften in the near term.
“I don’t think mills will be able to get prices down much — we may see some EU/Baltic sales in the $495-$500/mt CFR range,” a UK trader said. “Mills are actively buying shortsea scrap at $475-$480/mt CFR, so they would push for lower [shortsea prices] if they thought deepsea prices would also drop.”
“Scrap supply is still quite tight, especially for shred but HMS has good flow,” a Baltic recycler said. “The European November domestic scrap market looks quite good and is likely up Eur20-30/mt on the month, but there is a general softening in commodities.”
Weekly LME scrap futures trading volumes over the week to Oct. 28 totaled 30,790 mt, down from 68,970 mt recorded last week.
Most near-term rebar futures contracts saw significant losses on the week, as market sources expected physical Turkish export rebar prices to drop sharply amid weakening scrap and slow demand.
Platts assessed the October contract up 75 cents/mt on the week to $710.25/mt Oct. 28, with November down $20/mt to $714.50/mt, December $20/mt lower at $704.50/mt and January falling $21/mt to $709.50/mt.
The contango structure of the October-November portion of the forward curve softened significantly on the week, suggesting that futures traders expect near-term rebar prices to be less firm.
The backwardated structure of the November to December portion of the curve, and contango over the December to January portion of the curve were largely unchanged on week, albeit at lower levels.
Turkish physical rebar export prices softened $5/mt on the week to $732.50/mt FOB on Oct. 28, after hiking to $740/mt FOB on Oct. 26, reaching its highest level since May 28. Mills hiked offers to around $760-$780/mt FOB during the week amid fresh sale to Canada, booked week ending Oct. 22, and strong scrap, before softening ahead of the holidays.
“[Turkish mills] have overstretched themselves,” a second UK trader said. “They took some good export sales and domestic sales picked up so they started to buy scrap but they didn’t sell rebar at $750/mt FOB — nowhere near even.”
The source indicated that selling rebar in the export market for Turkish mills might be difficult at even $700/mt FOB in the near term and noted workable levels for the Far East market around $660-$670/mt FOB for Turkish rebar.
Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 2,310 mt, up from 1,690 mt traded volume last week.
The daily outright spread between Turkish export rebar and import scrap was assessed at $233/mt Oct. 28, up 50 cents/mt on the week.
Elsewhere, Indian scrap futures weekly trading volumes over the week to Oct. 28 on the LME totaled 210 mt, matching the volume traded over the week to Oct. 7.
A total of 660 mt has traded so far on the contract, which settles basis the Platts CFR Nhava Sheva shredded scrap index, since its launch in late July 2021.
Source:Platts
