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LME scrap, rebar contracts see further losses amid weak physical market

Scrap futures contracts on the London Metal Exchange saw significant losses over the week to Aug. 19, while weekly trading volumes recovered from the previous week’s low.

S&P Global Platts assessed the August scrap contract down $6.50/mt week on week to $458.50/mt on Aug. 19, while the September contract dropped $12.50/mt on the week to $460/mt. The October contract lost $18.50/mt on the week to $456/mt, while the November contract fell $20.50/mt to $454/mt on the week.

The contango structure for the August-September portion of the forward curve weakened on the week, while the forward curve for the September-November portion of the LME scrap shifted into backwardation, suggesting that futures traders expect physical prices might weaken in the near-term.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) fell $5/mt on the week to $450/mt CFR Turkey on Aug. 19, as market sources expected further near-term weakening amid a lack of finished steel demand.

“Sentiment is not positive and iron ore crashed down — more for speculative reasons than for fundamentals though — but scrap dynamics are not correlated, and at the moment, all sellers are struggling in the red at today’s prices,” an EU trader said.

Weekly LME scrap futures trading volumes over the week to Aug. 19 totaled 16,320 mt, up from 5,360 mt recorded last week, which was the lowest recorded weekly volume since the week ended Jan. 2, 2020.

Near-term rebar futures also saw sharp losses on the week, in line with scrap. The September-October portion of the curve shifted into a flat structure from slight contango last week, while the October-November portion of the curve shifted into a soft contango from a flat structure. This suggested futures traders’ expectations that physical rebar prices may recover in the near-term despite current poor physical steel demand.

Platts assessed the August contract down $10/mt on the week to $689.50/mt on Aug. 19, while the September contract also dropped $10/mt on the week to $699.50/mt. The October contract fell $20/mt to $699.50/mt on the week, while the November contract lost $15/mt to $704.50/mt.

Turkish physical rebar export prices dropped $18.50/mt on the week to $679/mt FOB on Aug. 19, as scrap prices weakened, and a continuous lack of demand pushed workable levels lower. Sources noted that recent domestic rebar sales at lower prices could also negatively impact rebar export workable levels.

“The main issue for producers is that demand is not showing up,” an Iskenderun mill source told Platts. “Turkish mills did not sell enough to the export market, and the holiday season started in Europe,” he said.

The daily outright spread between Turkish export rebar and import scrap was assessed at $229/mt Aug. 19, down $13.50/mt on the week.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 9,060 mt, up from 6,420 mt recorded last week, highest recorded since week ended July 29, when the trading volumes totaled 10,930 mt.
Source: Platts

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