LME scrap, rebar see sharp losses, India hits volume peak

Near-term scrap and rebar futures contracts on the London Metal Exchange saw sharp losses over the week to Dec. 2, as expectations of near-term weakness in physical prices persisted.

Platts assessed the December contract down $24.50/mt on the week to $455/mt on Dec. 2. The January contract fell $22.50/mt on the week to $441.50/mt, while the February contract fell $23 /mt on the week to $434/mt.

The backwardated structure for the December-February forward curve remained largely unchanged on week, suggesting that futures traders’ continue to hold firm expectations of a near-term drop in physical scrap prices.

“The LME December contract at $455/mt has no bearing on today’s physical price – let’s see if $470/mt CFR for HMS 1/2 80:20 is achieved first,” a Turkish mill source said. A UK trader said the LME scrap backwardation was too steep and unlikely to be realized in the physical market.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 dropped $11.75/mt on the week to $480/mt CFR Turkey on Dec. 2, as US and Baltic sellers accepted lower bids from Turkish buyers.

A Turkish trader said below $480/mt CFR could soon be workable for Baltic-origin HMS 1/2 80:20.

“It is a finance game so it’s hard to say [if below $480/mt CFR is workable] – everybody will make his own decision as [Baltic region scrap] collection prices are still very high,” a Turkish agent source said. “Selling is gambling and not selling is also gambling, but you still can skip January shipment and ship in February.”

Weekly LME scrap futures trading volumes over the week to Dec. 2 totaled 58,230 mt, up from 30,190 mt recorded last week.

Near-term rebar futures contracts also saw sharp losses on the week, while physical Turkish export rebar prices continued softening amid consistently weak demand.

Platts assessed the December contract down $12.50/mt to $692.50/mt on the week to Dec. 2. The January contract fell $22/mt to $669.50/mt, while the February contract fell $3/mt on the week to $676.50/mt.

The backwardated structure of the December-January portion of the forward curve strengthened sharply on week, suggesting that futures traders’ continue to expect a strong near-term physical price downtrend.

However, the backwardation over the January-February portion of the curve shifted into contango over the week to Dec. 2, highlighting uncertainty in the physical price direction over the first quarter of 2022.

Turkish physical rebar export prices dropped $2.50/mt on the week to $717.50/mt FOB on Dec. 2.

Mills were trying to hold firm around $720/mt FOB minimum, with lower levels dependent “on how mills’ production programs are,” according to one Turkish trader.

“I expect a great rally in two or three weeks as stocks are low everywhere,” a second Turkish trader said.

Sharp volatility in the Turkish lira has led to very low rebar sales in the domestic market. The lira weakened to a new record low against the US dollar after the Turkish finance minister Lutfi resigned Dec. 1 and was replaced by deputy finance minister Nureddin Nebati, a loyalist to President Recep Tayyip Erdogan. Platts assessed the Turkish lira against the US dollar at Lira 13.6971 at 4.30 pm London time Dec. 2, down on day from Lira 13.3664 on Dec. 1.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 12,750 mt, up from 7,790 mt traded volume last week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $237.50/mt, up $9.75/mt on the week.

Elsewhere, Indian scrap futures saw an all-time daily trading volume high on Nov. 29, when 1,320 mt traded. A total of 2,430 mt has traded so far on the contract, which settles basis the Platts CFR Nhava Sheva shredded scrap index, since its launch in late July 2021.

— Viral Shah