LME scrap contracts see strong losses on week, trading volumes fall
Near term scrap and rebar futures contracts on the London Metal Exchange saw heavy losses over the week to May 12, while the trading volumes decreased on the week.
S&P Global Commodity Insights’ Platts assessed the May contract $52.50/mt lower on the week to $482.50/mt May 12. The June contract fell $61/mt to $469.50/mt, while the July contract lost $66/mt to $464/mt. The August contract dropped $64.50/mt to $459/mt.
The backwardated structure over the May-July portion of the forward curve strengthened on the week, suggesting that futures traders on May 12 continued to expect physical scrap prices to soften in the near-term.
The backwardation over July-August portion of the forward curve softened slightly.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $55/mt week on week to $480/mt CFR Turkey May 12, as most mills held back from buying.
“Today people want to sell but buyers don’t want to buy – the main issue is not the price but finished steel demand so I am expecting lower prices soon – the financial markets are looking really desperate so it is destroying the appetite to take a position,” a Turkish mill source said.
Weekly LME scrap futures trading volumes over the week to May 12 totaled 86,510 mt, down from 125,600 mt last week.
Near-term rebar futures contracts also saw strong losses over the week to May 12 in line with scrap.
S&P Global Commodity Insights’ Platts assessed the May contract $49.50/mt lower on the week to $801/mt. The June contract fell $86/mt to $752.50/mt, while the July contract lost $85.50/mt to $755/mt. The August contract dropped $83.50/mt to $750/mt.
The backwardation over the May-June portion of the forward curve strengthened over the week, suggesting that futures traders expect prices to soften sharply in the near-term.
The slight contango structure over the June-July portion of the curve remained, while the backwardation over July-August portion of the curve softened slightly.
Turkish physical rebar export prices fell $60/mt on the week to $820/mt FOB May 12, as continuously weak demand in the export market, along with weakening scrap import prices kept pressure on the market.
“My impression from West-African market currently is that buyers are in a wait and see mode,” the trader source said. “They know prices are decreasing and they still have some stocks left, so buyers are not in a hurry to buy.”
“Most customers are still holding off,” a UK-based trader said. “I think that prices will continue to decline to around $780-$800/mt FOB.”
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 24,970 mt May 12, down from 41,830 mt the previous week.
The daily outright spread between Turkish export rebar and import scrap was assessed at $340/mt May 12, down $5/mt week on week.
Elsewhere, Indian scrap futures, which settles basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 120 mt over the week to May 12. The contract has seen a total volume of 5,040 mt traded since its launch in late July 2021.