Islamabad September 6 2021: Scrap and rebar futures contracts on the London Metal Exchange saw significant losses over the week to September 2 2021, while weekly trading volumes recovered from the previous week's low.
The September-October portion of the forward curve shifted into a slight contango on the week albeit at lower levels, while the backwardated structure of the October-November portion of the LME scrap forward curve moved into a flat structure, suggesting that futures traders expect physical prices might move sideways in the near term, though maintaining weakened levels.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dipped $2.50/mt on the week to $445/mt CFR Turkey Sept. 2, as market sources expected further near-term softening amid a lack of finished steel demand.
"German [domestic] prices are decreasing now so maybe we are seeing the first signs of a more general adjustment of the price level. If demand is slowing down both in Europe and in the export markets of Turkey, we could see more downward movement," a Baltic recycler said.
"[The expected drop in US and EU domestic prices] combined with high stocks of HMS and cut grades in these markets, but especially in the Benelux region, puts pressure on the scrap market," one mill source said. "If freight costs normalize in the short term, then we could even see as low as $390/mt CFR for US-origin HMS 1/2 (80:20)."
Weekly LME scrap futures trading volumes over the week to Sept. 2 totaled 23,950 mt, the highest recorded weekly volume since the week ending Aug. 5, up from 5,760 mt recorded last week.
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Near-term rebar futures also saw sharp losses on week, in line with scrap. The contango structure of the September-October portion of the curve softened slightly on the week, while the backwardation for the October to November portion of the curve shifted into a flat structure, albeit at a lower level.
This suggests futures traders expect physical rebar prices may stabilize in the near term, despite current poor physical steel demand.
Platts assessed the September contract down $23.25/mt on the week to $671.25/mt Sept. 2, while the October contract dropped $24.50/mt on the week to $675/mt. The November contract fell $20/mt to $675/mt on week.
Turkish physical rebar export prices softened $2.50/mt on the week to $667.50/mt FOB Sept. 2, as scrap prices softened, and a continuous lack of demand pushed workable levels lower.
Workable levels for Turkish rebar in the export market remained under continuous pressure as high freight rates continued to hinder Turkish mills' ability to make large-tonnage sales to the Far East. Some mills maintained high FOB offers compared with the wider market as they reportedly sold small tonnages of rebar in the export market.
The daily outright spread between Turkish export rebar and import scrap was assessed at $222.50/mt Sept. 2, stable on the week.
Rebar futures weekly trading volumes this week on the London Metal Exchange totaled 1,110 mt, recovering from the previous week's low of 450 mt.