Posted on 24 Jan 2022
The near-term forward curve for scrap futures contracts on the London Metal Exchange reverted to a clearer backwardation over the week to Jan. 20, while trading volumes decreased on week.
Platts assessed the January scrap contract up $1.25/mt to $469.75/mt on Jan. 20, and the February contract rose $1.50/mt week on week to $466/mt. Meanwhile, the March contract lost $2.50/mt to $464.50/mt, and the April contract decreased $2/mt to $458.50/mt.
The backwardation structure for the January-February portion of the forward curve softened slightly week on week, while the contango over the February-March portion of the curve shifted into backwardation on week to Jan. 20. The backwardation for the March-April portion of the forward curve also softened slightly on week.
Over January, the Q1 2022 forward curve has shown a lack of clear direction, even occasionally shifting into a slight near-term contango, highlighting future traders’ uncertain expectations. However, the clearer backwardation over the week to Jan. 20 suggests some now expect a slight softening of physical prices in the near-term.
Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 softened 25 cents/mt week on week to $469.75/mt CFR Turkey on Jan. 20, following an increase to $470.25/mt CFR on Jan. 17 at the start of the week, as mills continued to hold back from the deepsea market.
“Turkey cannot sell anything due to the high scrap price and increased energy and natural gas costs — prices will not continue in these levels,” one mill source said. “First, we have to be sure about the [finished steel] sales price, which is currently $45-$50/mt above the wider market level, and then we can talk about scrap price expectations.”
Physical sellside sources, however, pointed to slower scrap collection in the winter period and firmer demand for bulk scrap cargoes from other markets, such as Bangladesh.
Weekly LME scrap futures trading volumes over the week to Jan. 20 totaled 27,550 mt, down from 59,230 mt on week.
Most near-term rebar futures contracts saw some losses over the week to Jan. 20. Platts assessed the January contract up $5/mt at $705/mt. However, the February contract decreased $1/mt to $707/mt, and the March contract lost $3/mt week on week to $695.50/mt. The April contract was stable at $684.50/mt.
The contango structure over the January-February portion of the forward curve significantly softened week on week, suggesting that futures traders’ expectation of further upside in physical prices in the near term is less firm.
The backwardation over the February-April portion of the curve softened slightly over the week to Jan. 20.
Turkish physical rebar export prices were stable at $700/mt FOB on Jan. 20, ranging between $699-$701/mt FOB during the week, as slow demand and strong scrap and energy costs kept pressure on prices, while mills tried to maintain minimum workable levels.
“[Turkish mills] are showing resistance to higher scrap,” one trading source told Platts. “I think Turkey will struggle to sell finished products at higher prices. They can’t sell at $700/mt FOB, maybe only small volumes, but I also think that they would not go below $700/mt FOB Turkey,” he added.
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 16,650 mt on Jan. 20, up from 11,580 mt the previous week, to reach the highest weekly trading volume total since Oct. 7, 2021, when 40,950 mt was traded.
The daily outright spread between Turkish export rebar and import scrap was assessed at $230.25/mt Jan. 20, up 25 cents/mt week on week.
Elsewhere, Indian scrap futures, which settles basis the Platts CFR Nhava Sheva shredded scrap index, traded 30 mt by Jan. 20. The futures saw a total volume of 2,940 mt traded since its launch in late-July 2021.
Source:Platts
