LME scrap weekly trading volumes surge, near-term contango firms

Scrap futures contracts on the London Metal Exchange fell sharply over the week to Aug. 5, while weekly trading volumes surged.

S&P Global Platts assessed the August scrap contract down $18.50/mt week on week to $470/mt on Aug. 5, while the September contract dropped $7/mt to $480.50/mt. The October contract lost $11/mt to $483.50/mt.

The forward curve for the August-September portion shifted into a strong contango on the week, suggesting that futures traders expect physical prices to strengthen in the near term after recent losses. The contango structure for the September-October portion of LME scrap softened, but expectations of firmer physical prices in Q4 remained.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) fell $7/mt on the week to $462.50/mt CFR Turkey on Aug. 5, as sellers were reluctant to drop workable levels amid buyer expectations that physical scrap prices might soften further in the near term.

“August is a quiet period, and the Turks do need to buy for September shipment, but iron ore crashed today — this volatility will create panic in combination with a quiet August market — so we could see $450/mt CFR soon for scrap,” one trading source said.

“I’m not chasing it lower [than the last deal heard at $463/mt CFR]. I don’t see a lot more activity or a lot of people chasing for orders — I think we’re kind stuck in this lull right now,” a US recycler said.

Weekly LME scrap futures trading volumes over the week to Aug. 5 totaled 76,680 mt, up from 57,850 mt recorded last week. The current weekly trading volumes were highest recorded since the week ending May 20 with 151,170 mt.

Near-term rebar futures for the August-October portion of the curve saw sharp losses on the week. Though the contango structure for the August-September portion of the forward curve strengthened slightly, the September-October portion of the curve shifted into a contango from a flat structure on week. This suggests that futures traders expect physical rebar prices might gain in the near term.

Platts assessed the August contract down $29.50/mt on the week to $710/mt Aug. 5, while the September contract fell $28/mt $716.50/mt. The October contract lost $25/mt to $719.50/mt.

Turkish physical rebar export prices dropped $10/mt on the week to $705/mt FOB Aug. 5 as scrap prices softened and a lack of demand pushed workable levels lower. Sources reported a fresh Marmara mill sale for a top-up cargo to Singapore totaling 15,000 mt, but the overall market sentiment kept rebar export workable levels under pressure.

One UK trader told Platts that it won’t be easily possible for Turkish mills to sell large quantities of rebar to the Far East. Indian mill offers are keeping prices in the region at low levels, so Turkish mills might be able to sell a small top-up cargo at a high price on an already booked vessel. For large tonnage deals, however, Turkish mills might have to drop rebar prices to around $670-$680/mt FOB soon, he noted.

The daily outright spread between Turkish export rebar and import scrap was assessed at $242.50/mt Aug. 5, down $3/mt on the week.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 7,840mt, down from 10,930 mt recorded last week.
Source: Platts