LME scrap contracts fall again on week, trading volumes drop

Near-term scrap futures contracts on the London Metal Exchange saw losses over the week to May 19, while trading volumes also decreased dropped.

Platts, part of S&P Global Commodity Insights, assessed the May contract down $2/mt on the week at $480.50/mt May 19. The June contract fell $18.50/mt to $451/mt, July lost $9/mt to $455/mt, and August dropped $13.50/mt to $445.50/mt.

The backwardated structure over the May-June portion of the forward curve strengthened on the week, suggesting that futures traders on May 19 continued to expect physical scrap prices to soften in the near term.

The backwardation over the June-July portion of the curve shifted into a slight contango, while the backwardation for July-August strengthened slightly.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $15/mt week on week to $465/mt CFR Turkey on May 19, as market sources heard of a fresh Baltic-origin cargo deal.

“There were some scrap offers around $460-$470/mt CFR over the last few days on the back of a slight upturn in domestic rebar, billet demand but we need to see if that continues — otherwise we’ll see below $750/mt FOB for rebar and below $450/mt CFR for scrap soon,” a Turkish mill source said.

“Under these market conditions and big competition [among recyclers], I do not need to go around with an offer,” one Turkish agent source said. “The problem now is not to negotiate for scrap, but that the mills have to sell [finished products].”

Weekly LME scrap futures trading volumes over the week to May 19 totaled 43,340 mt, down from 86,510 mt last week.

Most near-term rebar futures contracts also saw losses over the week to May 19.

Platts assessed the May contract up 50 cents/mt on the week to $801.50/mt. The June contract fell $8/mt to $744.50/mt, July lost $15/mt to $740/mt, and August dropped $19.50/mt to $730.50/mt.

The backwardation over the May-June portion of the forward curve strengthened over the week, suggesting that futures traders continued to expect prices to fall sharply in the near term.

The contango structure over the June-July portion of the curve shifted into slight backwardation, while the backwardation over July-August strengthened.

Turkish physical rebar export prices fell $55/mt on the week to $765/mt FOB May 19, as weak demand in the export market, along with weakening scrap import prices, kept pressure on the market. Market players heard of limited export deals for rebars booked to Africa and Middle East at softened levels, but the sales were not deemed significant enough.

“Yes, something is happening, however demand is not big enough to make up for all the steel sector in Turkey,” one Marmara mill source said. He noted that price levels were currently not that important in the market and that the important factor was that the market wanted to see some positive indications.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 1,010 mt May 19, down from 24,970 mt the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $300/mt May 19, down $40/mt week on week.

— Rabia Arif, Viral Shah