London December 18 2021: Most near-term scrap and rebar futures contracts on the London Metal Exchange saw losses over the week to Dec. 16, as trading volumes increased.
Platts assessed the December contract down $4.50/mt week on week at $461/mt on Dec. 16. The January contract fell $3/mt to $453.50/mt. The February contract rose $5/mt week on week to $449.50/mt. The March contract jumped $12.50/mt to $442/mt.
The backwardated structure for the December-March forward curve softened week on week, suggesting that futures traders have recalibrated their expectations of a near-term drop in physical scrap prices to be smaller than previously anticipated.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) dropped $2.50/mt week on week to $465/mt CFR Turkey on Dec. 16, after increasing to $470.25/mt CFR on Dec. 10, as demand for scrap was dampened by the continued downtrend of the Turkish lira and still low rebar sales.
The Turkish lira depreciated sharply during the day after the Turkish Central Bank decided to implement another 100 basis point interest rate cut, to 14%, Dec. 16.
A Turkish agent said that with the labor and electricity paid in the Turkish lira, the scrap-billet conversion cost in US dollar had dropped $30/mt to $160-$170/mt, despite the opposite effect of the currency crisis on the cost of imported scrap.
“It will be tough six weeks. Turkey will be stepping out of the supply side for finished steel,” the agent said. “Steel is not in high demand. Some [producers] are really considering shutting down production.”
Weekly LME scrap futures trading volumes over the week to Dec. 16 totaled 22,300 mt, up from 21,420 mt recorded the previous week.
Most near-term rebar futures contracts also saw losses, while physical Turkish export rebar prices continued to soften amid consistently weak demand.
Platts assessed the December contract down $2.50/mt week on week at $697/mt on Dec. 16, while the December contract lost $5/mt to $689.50/mt. The January contract gained $3/mt to $679.50/mt, and the February contract rose $4.50/mt week on week to $670/mt.
The backwardated structure of the December-January portion of the forward curve strengthened slightly week on week, suggesting futures traders expect further near-term downtrend in physical prices.
However, the backwardation over the January to March portion of the curve softened over the week, suggesting futures traders expect any near-term physical price downtrend to be less drastic than previously anticipated.
Turkish physical rebar export prices fell $17.50/mt week on week to $690/mt FOB on Dec. 16, as the market remained under pressure amid a persistent lack of demand.
Rebar futures weekly trading volumes in the week on the London Metal Exchange totaled 12,850 mt, significantly up from 3,770 mt traded volume the previous week.
The daily outright spread between Turkish export rebar and import scrap was assessed at $225/mt Dec. 16, down 15/mt week on week.
