Scrap and rebar futures contracts on the London Metal Exchange dropped sharply over the week to May 20, but maintained a near-term contango structure, as weekly scrap trading volumes surged to a one-year high.
Weekly scrap futures trading volumes over the week to May 20 totaled 151,170 mt, significantly above the 96,030 mt recorded last week. Weekly trading volumes reached the highest level since the week ending May 28, 2020, when volumes totaled 235,660 mt.
The May month-to-date scrap trading volumes totaled 280,700 mt, up sharply from the April 2021 total of 216,760 mt.
Platts assessed the May scrap contract down $26/mt week on week at $503.50/mt on May 20, while the June contract dropped $20/mt to $525.50/mt. The July contract also fell $32/mt week on week to $518/mt, and the August contract dropped $33.50/mt to $516/mt.
Despite the losses, the forward curve remained in a strong contango for May to June contracts, suggesting futures traders still expect near-term strength in the physical market, before shifting into a slight backwardation over June to August, but with contracts still maintaining elevated levels.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) increased $5.75/mt week on week to $508.75/mt CFR Turkey on May 20, as multiple cargos were booked over the past few days at elevated levels. The index reached its highest level since it hit a record high of $510/mt CFR in January 2011.
"I feel like the market is getting prepared for some increase of around $40-$50/mt -- everybody is aware of the nice margin and the nice export lines from Turkey to Asia and also South America," a Turkish mill source said.
"Unfortunately, I can't see so much possibility that the Turkish domestic market can buy with full capacity, but exports can cover this for a few months. And facilities will be able to work with good capacity and good margins."
Rebar futures, in line with scrap, also saw sharp losses in May to August contracts. The forward curve maintained a strong contango structure over May to June contracts, suggesting that futures traders expect near-term price strength to continue in the physical market.
However, the June-July portion of the forward curve shifted into a significant backwardation, suggesting prices are likely to drop but still maintain elevated levels.
Platts assessed the May contract down $15/mt week on week at $754.50/mt on May 20, while the June contract dropped $25/mt to $784.50/mt and the July contract plummeted $70.50/mt to $759.50/mt. The August contract fell $60.50/mt week on week to $764.50/mt.
Turkish physical rebar export prices fell $2.50/mt week on week to $767.50/mt FOB on May 20, as news of negative market sentiment in China caused buyers to pull back in the hope of lower workable prices for Turkish exported rebar in the near term.
Turkish mills have strong export rebar orderbooks and are currently largely offering as far ahead as August shipments, allowing them to maintain elevated offer levels.
"Actually, there are a lack of offers in the market and I have clients who want to buy. Markets like South America and North America are good, as you know," trading source said. "Mills are not too eager to sell right now and this is my feeling, they have not said it, but I think [most] mills are not very confident about what is going on in China."
The daily outright spread between Turkish export rebar and import scrap was assessed at $258.75/mt on May 20, down $8.25/mt week on week.
Rebar futures weekly trading volumes on the London Metal Exchange totaled 26,510 mt in the week to May 20, the highest weekly total since the week ending Nov. 19, 2020. Rebar volumes were up sharply from 11,730 mt recorded the week ending May 13.
So far in May rebar trading volumes have totaled 40,590 mt, up sharply from the April total of 8,090 mt.
