Posted on 14 Mar 2022
Most near-term scrap futures contracts on the London Metal Exchange continued to gain over the week to March 10, while the trading volumes also increased to almost a two-year high.
S&P Global Commodity Insights’ Platts assessed the March contract up $44.50/mt to $649.50/mt on March 10, while the April contract lost $30/mt to $635/mt. The May contract gained $19.50/mt to $649.50/mt, while June rose $4.50/mt to $625/mt.
The contango structure over the March-April portion of the forward curve shifted into backwardation, suggesting that futures traders on March 10 expected physical scrap prices to soften in the immediate term, albeit maintaining elevated levels.
The backwardation over the April-May portion of the curve shifted into strong contango, while the backwardation over the May-to-June portion of the curve strengthened.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased $55/mt week on week to $650/mt CFR Turkey March 10, as prices started stabilizing before buyers return to purchase scrap cargoes for shipment in the second half of April.
Price expectations from market participates were mixed, as several buyers implied that the market had already softened amid some lower offers and tradable values, while sell-side sources were expecting a further rally.
“I haven’t seen a price correction yet — only that the Turkish mills are taking a minute to catch their breath. Actually, I’m still hearing US sellers are aiming for $670/mt CFR,” a European scrap dealer said.
Weekly LME scrap futures trading volumes over the week to March 10 totaled 175,390 mt, up from 144,860 mt last week, reaching the highest weekly trading volumes since May 28, 2020.
Most near-term rebar futures contracts also saw strong gains over the week to March 10.
Platts assessed the March contract up $60/mt week on week to $915.50/mt, while the April contract gained 50 cents/mt to $925.50/mt. The May contract increased $34.50/mt to $915/mt, while June jumped $10/mt to $880.50/mt.
The contango over the March-April portion of the forward curve was less firm over the week, suggesting that futures traders still expect prices to increase though the gain might not be extremely significant in the immediate near-term.
The backwardation over the April-May portion of the curve also softened on the week, while the backwardation over the May-June portion strengthened.
Turkish physical rebar export prices rose $85/mt on the week to $930/mt FOB March 10, as mills remained firm at elevated levels while buyers showed resistance to buying large volumes at current prices.
“Prices are very volatile,” one European trader told S&P Global, “As everybody wants to take advantage of the situation, it is very difficult to have a market price unless to do a deal.”
He added that current Turkish offers for rebars in the export market, which some sources cited were as high as $980/mt FOB during the day, seemed crazy. “I would not see who would buy at this price, considering the Chinese prices,” he said, noting that European safeguard import quotas for rebars were more than full so nobody could sell in Europe for the Q2 2022 quota.
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 56,180 mt March 10, down from an all-time high of 93,210 mt the previous week.
The daily outright spread between Turkish export rebar and import scrap was assessed at $280/mt, up $30/mt week on week.
Elsewhere, Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 360 mt by March 10, up from 150 mt traded last week, reaching the highest level since the week ending Dec. 2, 2021, when weekly trading volumes stood at 1,320 mt. The contract has seen a total volume of 3,600 mt traded since its launch in late July 2021.
Source:Platts
