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LME scrap contracts gain on week, near-term contango strengthens

Scrap futures contracts on the London Metal Exchange inched up over the week to Sept. 16, while the near-term contango strengthened

S&P Global Platts assessed the September scrap contract up 50 cents/mt week on week to $446/mt Sept. 16, while October rose $5/mt on the week to $456.50/mt. The November contract gained $2/mt on the week to $449.50/mt, with December up $4.50/mt to $449.50/mt.

The contango structure for the September-October portion of the forward curve strengthened on the week, suggesting that futures traders expect physical prices might strengthen slightly in the near-term. The backwardated structure of the October-November portion of the curve also strengthened while the November-December portion of the LME scrap forward curve shifted into a flat structure.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) temporarily dropped to $437.50/mt CFR Sept. 13, before recovering over the week to $441/mt CFR Turkey Sept. 16. This was down $1.50/mt on the week from Sept. 9. The market saw a flurry of bookings as mills returned to book at these softened levels.

“I think for a while, we might see the prices sideways for scrap, but finished products are another issue which is worrying people — I still feel negative sentiment in the final product market,” a Turkish mill source said.

“Turkish buyers are definitely back for scrap, and they can afford to pay higher prices as they are still making good margins,” a UK trader said. “Generally, there is lack of good quality scrap and the cost of electricity is still not that relevant compared to scrap — their rebar-scrap spread is still very healthy.”

The daily outright spread between Turkish export rebar and import scrap was assessed at $226.50/mt Sept. 16, up $2/mt on the week.

Weekly LME scrap futures trading volumes over the week to Sept. 16 totaled 22,550 mt, down from 63,400 mt recorded last week.

For near-term rebar futures, the contango structure of the September-October portion of the forward curve softened on week, this suggests futures traders’ expectations regarding the rate of near-term rebar price increases are less firm. The October-November portion of the curve also shifted into a contango structure, while the backwardated structure of the November-December portion strengthened.

Platts assessed the September contract down $3.50/mt on the week to $669/mt Sept. 16, while October fell $5.50/mt to $674.50/mt. The November contract rose $3/mt to $678/mt on the week, with the December contract up 50 cents/mt to $672.50/mt.

Turkish physical rebar export prices inched up 50 cents/mt on the week to $667.50/mt FOB Sept. 16, having temporarily dipped to $665/mt over Sept. 10-15, as some mills increased offers amid recently reported deals to Israel, Yemen and Europe.

“[Turkish] rebar’s domestic demand is stable, not good but stable,” one UK trader said, adding that in the export market Turkish mills had sold some cargoes to Israel, Yemen and Europe at $665-$670/mt FOB.

The sales to Israel and Europe were unconfirmed by the time of publication and no additional details regarding tonnage or sellers were available. Two Marmara and Iskenderun mill sources cited recent deals to Yemen at $665-$670/mt FOB booked week ending Sept. 10.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 4,260 mt, down from 18,930 mt traded volume last week.
Source: Platts

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