Posted on 07 Mar 2022
Near-term scrap and rebar futures contracts on the London Metal Exchange jumped in the week to March 3, while the trading volumes also increased sharply on week.
S&P Global Commodity Insights assessed the March contract up $100.50/mt to $605/mt on March 3. The April contract jumped $160/mt to $665/mt, while the May contract gained $121.50/mt to $630/mt.
The contango structure over the March-April portion of the forward curve strengthened significantly, suggesting that futures traders expect physical scrap prices to increase substantially in the immediate near term. The contango over the April-May portion of the curve shifted into strong backwardation, albeit at elevated levels.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased $87/mt week on week to $595/mt CFR Turkey on March 3, as several recyclers continued to hold back in anticipation of higher deal levels. The assessment of Turkish imports of premium heavy melting scrap reached its highest level since the assessment began in early 2010.
"The sole priority of mills is securing material to complete [semi-finished and finished steel sales] of existing orders, so this causes the speed of the increase to accelerate with very few bookings done," a UK trading source said.
"It's a war situation and so people need to manage their risk -- I don't expect larger recyclers to renegotiate older sales, perhaps they'll ask for an extension to ship cargoes," one Turkish mill source said.
Weekly LME scrap futures trading volumes over the week to March 3 totaled 144,860 mt, up from 97,020 mt the previous week and reaching the highest weekly trading volume since May 20, 2021.
Near-term rebar futures contracts also saw strong gains over the week to March 3, in line with scrap. S&P Global Commodity Insights assessed the March contract up $107/mt week on week to $855.50/mt, while the April contract jumped $183/mt to $925/mt. The May contract increased $140/mt to $880.50/mt.
The backwardation over the March-April portion of the forward curve shifted back into strong contango over the week, suggesting that futures traders expect prices to increase significantly in the physical market in the immediate near-term.
The backwardation over the April-May portion of the curve also strengthened on the week, albeit at elevated levels.
Turkish physical rebar export prices increased $104/mt on week to $845/mt FOB on March 3, as mills increased offers amid strong scrap and billet prices, in reaction to a shortage of steel and raw materials in the region, due to the halted supply from Ukraine and Russia.
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 93,210 mt on March 3, up from 54,030 mt the previous week, reaching an all-time high.
The daily outright spread between Turkish export rebar and import scrap was assessed at $250/mt March 3, up $17/mt week on week.
Elsewhere, Indian scrap futures, which settle basis the Platts CFR Nhava Sheva shredded scrap assessment, traded 150 mt by March 3, up from 90 mt traded last week. The futures have seen a total volume of 3,240 mt traded since launching in late July 2021.
Source:Platts
