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FUTURES WRAP: Near-term LME scrap, rebar contracts see further losses

Friday, 13 August 2021

Scrap futures contracts on the London Metal Exchange saw significant losses for the third consecutive week over the week to Aug. 12.

S&P Global Platts assessed the August scrap contract down $5/mt week on week to $465/mt on Aug. 12, while the September contract fell $8/mt on the week to $472.50/mt. The October contract lost $9/mt on the week at $474.50/mt.

The contango structure for the August-September portion thus softened on the week, suggesting that futures traders expect physical prices to strengthen in the near-term after recent losses, but at slightly lower levels than before. The October-November portion of the LME scrap forward curve shifted from a contango to a flat structure. However, expectations of firmer physical prices in Q4 remain.

Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) fell $7.50/mt on the week to $455/mt CFR Turkey on Aug. 12, as sellers in the Benelux region were heard to have lowered workable levels. The US sellers were heard to have stepped back as buyers continued to target lower prices.

“[Workable levels] depend on the buyer-seller position. Those who have no patience can sell or buy,” a Turkish agent source said. “It’s difficult to say what the bottom level in scrap is.”

Weekly LME scrap futures trading volumes over the week to Aug. 5 totaled 5,360 mt, down from 76,680 mt recorded in the previous week.

Near-term rebar futures for the August-October portion of the curve also saw fell sharply on the week.

The contango structure for the August-September portion of the forward curve strengthened for the second consecutive week, suggesting that futures traders expect physical rebar prices to gain in the near term.

Platts assessed the August contract down $10.50/mt on the week to $699.50/mt on Aug. 12, while the September contract fell $7/mt on the week to $709.50/mt. The October-November portion of the curve remained flat on the week at $719.50/mt.

Turkish physical rebar export prices fell $7.50/mt on the week to $697.50/mt FOB on Aug. 12, as scrap prices softened while demand remained lackluster.

Turkish mills continued to avoid lowering export rebar prices, in anticipation of a possible improvement in demand, as rumors regarding a possible decision on a Chinese export tax on hot-rolled finished steel products continued.

The daily outright spread between Turkish export rebar and import scrap was assessed at $242.50/mt on Aug. 12, unchanged on the week.

Rebar futures weekly trading volumes for the week on the London Metal Exchange totaled 6,420 mt, down from 7,840 mt recorded in the previous week.

The new India shredded scrap futures contract -- which was launched by the LME on July 19 and settles against the monthly average of the Platts shredded scrap CFR Nhava Sheva index -- saw its first activity. Approximately 60 mt or six lots traded on Aug. 12, according to the LME Clear data.


-- Viral Shah

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