LME scrap contracts mostly higher, trading volumes jump

Most near-term scrap futures contracts on the London Metal Exchange saw strong gains over the week to Jan. 27, while trading volumes jumped on the week.

Platts assessed the January scrap contract down $1.75/mt to $468/mt Jan. 27, while the February contract rose $6/mt week on week to $472/mt. The March contract gained $7.50/mt to $472/mt, and the April contract jumped $13.50/mt to $472/mt.

The backwardation structure for the January-February portion of the forward curve shifted into a soft contango week on week, while the backwardation over the February-April portion was flat. The trend suggested that futures traders expect physical scrap prices to increase in the near term, while maintaining firm levels over the remaining first quarter.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 rose 25 cents/mt week on week to $470/mt CFR Turkey Jan. 27, after a drop to $467.50/mt CFR Jan. 24 at the start of the week, as sell-side sources held firm at workable levels.

“In Turkey, I think we can see an increase of $20/mt soon, but it just depends on whether it is by mid-February or towards the end of next month,” a UK trader said. Winter conditions have slowed scrap collection rates in the key exporting regions to Turkey.

Mill sources were less bullish, however. “The only concern is euro-US dollar parity, which is coming down, so buyers will push down [scrap prices],” one Turkish mill source said. Turkish mills have also temporarily reduced production utilization amid high energy prices and natural gas supply cuts, which may limit their scrap demand in the short-term.

Weekly LME scrap futures trading volumes over the week to Jan. 27 totaled 69,740 mt, up sharply from trading volumes of 27,550 mt last week, reaching the highest weekly trading volume total since Oct. 7, 2021, when 92,320 mt was traded.

Most near-term rebar futures contracts also saw strong gains over the week to Jan. 27. Platts assessed the January contract up 50 cents/mt at $705.50/mt, while the February contract increased $13/mt to $720/mt. March gained $24.50/mt to $720/mt and April jumped $30/mt to $714.50/mt.

The contango structure over the January-February portion of the forward curve strengthened significantly week on week, suggesting that futures traders expect strong upside for physical prices in the near term.

The backwardation over the February-March portion of the curve turned flat, while the backwardated structure over March-April softened.

Turkish physical rebar export prices increased $10/mt to $710/mt FOB Jan. 27, as the market reported a fresh 55,000 mt deal to Singapore along with some significant deals to Europe, leading to mills holding firm at their minimum workable levels.

Rebar futures’ weekly trading volumes in the week on the London Metal Exchange totaled 31,020 mt Jan. 27, up from 16,650 mt the previous week, to reach the highest weekly trading volume total since Oct. 7, 2021, when 40,950 mt was traded.

The daily outright spread between Turkish export rebar and import scrap was assessed at $240/mt Jan. 27, up $9.75/mt week on week.

— Rabia Arif, Viral Shah