LME scrap, rebar forward curves move into steep backwardation

Near-term scrap futures contracts on the London Metal Exchange saw sharp losses over the week to April 20.

Platts, part of S&P Global Commodity Insights, assessed the LME April scrap contract at $424.50/mt April 20, down $3.50/mt on the day, while the May contract was down $9.25/mt at $402/mt. The June and July contracts were also down on the day at $399.50/mt and $399/mt, respectively.

The forward curve for Turkey scrap futures on the London Metal Exchange entered a steeper backwardation over the April-July portion of the curve, highlighting expectations of further near-term declines in the physical price.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) declined $16.50/mt week on week to $416/mt CFR Turkey, as the recent pullback by Turkish mills prompted a short-term glut of available cargoes, which were sold at steadily lower levels.

Both buyers and sellers expect physical scrap prices to continue to soften after the Eid-al-Fitr public holidays in Turkey over April 20-23.

“We are out of the market not due to prices, but due to our [finished steel] sales. We will not purchase until they pick up,” a Turkish mill source said, citing an indicative near-term tradable value below $400/mt CFR. “I’m not seeing any demand until after the [presidential] elections [on May 14] and then we will see the real market.”

Weekly LME scrap futures trading volumes over the week to April 20 totaled 70,750 mt, down from 161,110 mt during the week ending April 13.

Near-term rebar futures contracts on the London Metal Exchange also saw strong losses and moved into a steeper backwardation amid continued concerns over near-term physical rebar demand. Turkish export offers remain uncompetitive to several markets, with only nearby markets such as Israel or Yemen regularly purchasing volumes from Turkey in recent months.

Platts assessed the April contract down $2/mt week on week at $679.50/mt on April 20. The May contract fell $27/mt week on week to $639.50/mt, while the June contract fell $26/mt to $637.50/mt. The July contract dropped $32.50/mt week on week to $634/mt.

Turkish physical rebar export prices fell $15/mt week on week to $670/mt FOB on April 20. The daily outright spread between Turkish export rebar and import scrap was assessed at $254/mt on April 20, up $1.50/mt week on week, but down $18.50/mt month on month.

Rebar futures weekly trading volumes in the week to April 20 on the LME totaled 9,620 mt, up from 5,640 mt recorded over the week to April 13.

Elsewhere, LME Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 270 mt in the week to April 20. The contract has seen a total volume of 11,220 mt traded since its launch in July 2021.

Author Viral Shah, viral.shah@spglobal.com