Scrap and rebar futures contracts on the London Metal Exchange jumped over the week to May 13, reflecting continued expectations of bullishness following recent physical market strength.
S&P Global Platts assessed the May scrap contract up $24/mt on the week at $529.50/mt on May 13, while the June contract jumped $30/mt at $545.50/mt on the week. The July contract rose $35/mt on the week at $550/mt, while the August contract jumped $47/mt at $549.50/mt on May 13.
Amid a strong hike in physical scrap prices, the forward curve contango structure for May to July contracts steepened significantly over the week, suggesting futures traders expect further near-term strength in the physical market, before shifting into slight backwardation over July-August contracts, albeit at significantly strong levels.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) gained $23.75/mt on the week at $503/mt CFR Turkey on May 13, as the market reported fresh deals at elevated prices amid a significant increase in finished steel levels.
“I believe mills will try to maintain the price at $510/mt CFR maximum for premium HMS 1/2 (80:20) for the short term so as to create a good margin base and then pay whatever is needed moving forward,” an EU trading source said.
Weekly scrap futures trading volumes over the week to May 13 totaled 96,030 mt, sharply up from 53,930 mt recorded the week prior. This was the highest weekly trading volume since the week ended March 11, when 125,850 mt was traded.
Rebar futures also jumped on the week, in line with scrap. The forward curve also displayed a strong contango structure over May to July contracts, before shifting into a backwardation over July-August contracts, albeit maintaining significantly elevated levels.
Platts assessed the May contract up $39/mt on week to $769.50/mt on May 13, while the June contract increased $59/mt on week to $809.50/mt and July contract rose $89.50/mt on week at $830/mt. The later-dated August contract soared $104.50/mt on the week at $825/mt on May 13.
Turkish rebar export prices rose sharply to a near 13-year high, as well-booked mills hiked offers sharply and held firm at elevated levels. Platts assessed Turkish exported rebar at $770/mt FOB Turkey on May 13, up $80/mt on the week.
The index reached its highest level since Sept. 16, 2008, when it sat at $850/mt FOB. Lead times for export rebar were heard as far ahead as end-July or early-August shipment, sources said.
“And off we go, into a bubble,” an EU buyer said. “But since everything is moving at lightning speed now, who knows what I’ll be able to offer tomorrow?”
The daily outright spread between Turkish export rebar and import scrap was assessed at an all-time high of $267/mt May 13, up $4.50/mt day on day.
Rebar futures weekly trading volumes on the London Metal Exchange totaled 11,730 mt in the week to May 13, up sharply from 3,830 mt recorded the week prior, to each its highest weekly volume since the week ended March 18.
— Viral Shah