Scrap, rebar futures contracts on the London Metal Exchange saw sharp gains over the week to Feb. 11, on expectations of a strengthening physical market in the near term.
Futures contracts for February-May gained on the week, with the scrap forward curve contango strengthening significantly on the week over February-March, before shifting into a slight backwardation over April-May. This might indicate futures trader expectations that the physical market price is likely to strengthen by the end of the first quarter before slightly softening during the second quarter.
S&P Global Platts assessed the February contract up $2/mt on the week at $417/mt on Feb. 11. The March contract gained by $24.50/mt over the week to $449.50/mt. The April contract increased $28/mt to $450.50/mt on the week and the May contract rose $22/mt on the week to $443.50/mt.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased $12.50/mt on the week to $410/mt CFR Turkey on Feb. 11, as Turkish mills returned to book cargoes at higher levels, after the index dropped to a near two-month low of $394/mt CFR on Feb. 5.
“The Turks don’t want the price to be much higher than $415-$420/mt CFR because they have to get higher prices for their finished steel later to cover it. They are allowing for scrap to go up now because they have sold well in the domestic market,” one trading source said.
“Even if scrap goes down at some point, it won’t go down a lot because there is incentive to buy in Europe and the US, so offers for Turkey will stay higher,” he added.
Weekly scrap futures trading volumes over the week to Feb. 11 totaled 53,090 mt, down from 78,480 mt recorded last week.
Rebar futures also saw gains on the week for February-May contracts, with the forward curve showing a significant contango over February-March contracts, before shifting into a slight backwardation over April-May contracts. This might indicate futures traders’ expectations that the physical market might strengthen by the end of the first quarter.
Platts assessed the February contract up $4/mt on the week at $598.50/mt on Feb. 11, while the March contract saw gains of $28/mt on the week at $620.50/mt. The April rebar contract increased $18/mt to $620.50/mt on the week, and the May contract rose $16/mt to $615.50/mt over the week.
The Turkish physical rebar export market saw a significant gain in prices as sources reported multiple sales to Israel, Yemen, African destinations as well as position cargoes booked by trading sources. The Platts assessment of Turkish exported rebar increased $12.50/mt on the week to $597.50/mt FOB Turkey on Feb. 11.
One Turkish trader said that Chinese traders expect positive movement in the market once the Lunar New Year holidays are over. Although Turkish market participants reported low demand from Southeast Asia given the holiday period, market participants saw some demand from Africa, he added.
“Perhaps next week we’ll see Turkish mills starting to sell for April shipment,” he said.
Rebar futures’ weekly trading volume this week on the London Metal Exchange totaled 9,070 mt, lower than 11,220 mt recorded last week.
The outright spread between Turkish exported rebar and import scrap was stable on the week at $187.50/mt on Feb. 11.
— Rabia Arif