Near-term LME scrap, rebar trading volumes surge

Near-term scrap and rebar futures contracts on the London Metal Exchange showed strong backwardation over the week to Nov. 4, while trading volumes surged.

Most near-term scrap futures contracts softened on week. Platts assessed the November contract up $2/mt on the week to $493.50/mt. Meanwhile, the December contract dropped $13/mt on the week to $473/mt. The January contract fell $4.50/mt on the week to $471/mt.

The backwardated structure for the November-December portion of the forward curve strengthened significantly, suggesting that futures traders continue to expect near term scrap prices in the physical market to weaken. The backwardation structure for the December to January portion of the curve softened on week.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) gained 50 cents/mt on the week to $500/mt CFR Turkey on Nov. 4, after dropping to $494/mt CFR Turkey on Nov. 2, as mills accepted higher prices for new bookings.

“The CFR Turkey price has bottomed. I think we will see it creeping up and maybe can see $510-$515/mt CFR as a near-term peak, though that could take some weeks,” a UK trading source said. “Mills might struggle on rebar sales though, and this could squeeze their margin.”

“Turkish mills should take a step back for a while in order to avoid more increases, because finished product demand is not that high,” one mill source said.

Weekly LME scrap futures trading volumes over the week to Nov. 4 totaled 37,030 mt, up from 30,790 mt recorded last week.

In contrast to scrap, most near-term rebar futures contracts saw gains on the week. Platts assessed the November contract up $15/mt to $729.50/mt on the week. The December contract gained $8.50/mt to $713/mt, while the January contract dipped $4/mt on the week to $705.50/mt.

The backwardated structure of the November-December portion of the forward curve strengthened on week, suggesting that futures traders’ expectations of softening near-term rebar prices are still firm. The contango structure of the December to January portion of the curve shifted into backwardation, albeit maintaining elevated levels.

Turkish physical rebar export prices jumped $10/mt on the week to $742.50/mt FOB on Nov. 4, as Turkish rebar exporters tried to stick to higher offers, but persistently low demand made a lasting price recovery questionable.

Raised energy costs for the industry in Turkey coupled with ferrous scrap pricing hitting $500/mt CFR Turkey, pushed Turkish mills to look for $750-$765/mt FOB for their rebar exports, the highest level since May. However, rebar demand did not follow to support the recent hikes in asking prices, multiple sources agreed.

Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 11,150 mt, significantly higher compared to 2,310 mt traded volume last week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $242.50/mt Nov. 4, up $9.50/mt on the week.

Elsewhere, Indian scrap futures weekly trading volumes over the week to Nov. 4 on the London Metal Exchange totaled 210 mt, matching the volume traded over the week to Oct. 28.

A total of 870 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.

— Rabia Arif