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FUTURES WRAP: LME scrap sees strong gains, trading surges

Friday, 04 February 2022

Near-term scrap and rebar futures contracts on the London Metal Exchange saw strong gains over the week to Feb. 3, while scrap trading volumes increased.

Platts assessed the February and March scrap contracts both up $23/mt to $495/mt on Feb. 3, while the April contract gained $15.50/mt to $487.50/mt.

The forward curve over the February-March contracts remained flat, suggesting that futures traders expect physical scrap prices to remain stable at high levels over the period, while the March-April portion of the curve reverted to backwardation on the week to Feb. 3.

Spot prices for physical imports of premium heavy melting scrap 1/2 80:20 jumped $22/mt week on week to $492/mt CFR Turkey on Feb. 3, amid fresh deals booked from the UK, the US and the Baltic regions.

Turkish mills were indicating higher workable levels for scrap imports by the end of the week on Feb. 3. One Turkish mill source noted that $500/mt CFR could be possible in the very near term if buyers can't hold "their finger [above] the panic button."

"$490-$495/mt CFR [for Baltic-origin HMS 1/2 80:20] is more realistic for today – expectations are still up to $500/mt CFR, which was the psychological limit in the past," a Turkish agent source said.

Weekly LME scrap futures trading volumes over the week to Feb. 3 totaled 86,940 mt, up from trading volumes of 69,740 mt last week, reaching the highest weekly trading volume total since Oct. 7, 2021, when 92,320 mt was traded.

Near-term rebar futures contracts also saw strong gains over the week to Feb. 3, in line with scrap. Platts assessed the February contract up $18/mt on the week to $738/mt on Feb. 3. The March contract jumped $15.50/mt week on week to $735.50/mt, and the April contract gained $10/mt to $724.50/mt.

The flat structure over the February-March portion of the forward curve shifted into soft backwardation over the week, while the backwardation over the March-April portion of the curve strengthened on the week, suggesting that futures traders expect near term physical rebar prices to soften, albeit remaining at sharply higher levels.

Turkish physical rebar export prices increased $15/mt to $725/mt FOB on Feb. 3, as mills increased offers during the week starting Jan. 31 after selling strong volumes to Europe. Market participants reported that mills were quite firm in their minimum workable levels as they were waiting to see if any fresh deals can be booked to the Far East market after the Chinese Lunar New year holidays.

Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 12,780 mt on Feb. 3, down from 31,020 mt the previous week.

The daily outright spread between Turkish export rebar and import scrap was assessed at $233/mt Feb. 3, down $7/mt week on week.

-- Rabia Arif, Viral Shah

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