Year-to-date CFR Turkey scrap future contracts’ trading volumes on the London Metal Exchange reached a five year-annual high of 4.32 million mt, latest data to July 21 showed.
The LME CFR Turkey scrap futures’ trading volumes for the year up to July 21 totaled approximately 432,317 lots, or 4.32 million mt, up from about 4.31 million mt for the full year 2022. Average daily trading volumes over 2023-to-date totaled nearly 31,100 mt.
This was the highest annual trading volume since 2018, when a record 4.85 million mt traded, a volume which is likely to be surpassed by the end of 2023, if daily trading volumes continue at their current rate.
“Since the introduction of the liquidity window in November 2022, we have seen a step change in participation in the CFR Turkey steel scrap contract. Remaining on trend, 2023 got off to a strong start with February our first ever month with more than a million tons traded. This year has already seen higher volume for LME Steel Scrap CFR Turkey [Platts] than total annual volume in each of the last three years,” Robin Martin, head of market development, at the London Metal Exchange said.
“The growth in liquidity was largely driven by an influx of new participants from all parts of the value chain who brought diverse hedging needs, new trading strategies and different market views. As anticipated, we are in a good position to see 2023 become the first year to exceed 10 million tonnes traded,” Martin said. “This past quarter, steel scrap markets have been characterized by unusually low volatility. Despite this typically constraining trading activity, we have seen steady volumes on the contract over the quarter, with monthly trading volumes never dipping below the half million tonnes mark.”
The LME CFR Turkey scrap futures contract settles against the monthly average of the physical Platts CFR Turkey premium HMS 1/2 (80:20) assessment, S&P Global Commodity Insights data showed.
Over May and June, the Platts physical assessment remained rangebound between $379.50-$397/mt CFR, a relatively stable pricing period in a usually volatile market. Trading volumes on the LME CFR Turkey futures contract for May and June totaled 630,170 mt and 583,290 mt, respectively, higher than every monthly trading volume since September 2018, except the two highs in January and February 2023.
“The increase of interest from the physical players has been a game changer and seen volumes rise across the board making it increasingly feasible to hedge large cargoes,” Joshua Stern, broker at Freight Investor Services, said.
The LME CFR Turkey scrap forward curve remains in a soft near-term backwardation over July-August portion, before shifting into a slight contango over the August-October period.
Platts, part of S&P Global, assessed the LME July contract at $366.50/mt July 24, while the August contract assessed at $361.50/mt, both unchanged on the day. The September contract was at $363/mt, up $2.50/mt on the day, while October remained unchanged on the day at $365/mt.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) into Turkey dropped $51/mt over the year-to-date to $354/mt CFR Turkey on July 21, briefly rising to an annual high of $463 on March 13.
Continuous weak demand for Turkish finished steel products has kept pressure on scrap import prices. Market sources expect physical scrap import prices to soften further in the near term as finished steel demand remains weak.
“There haven’t been many deals in July and we’re already well into the second half of the month, which suggests there is more scrap in the yards than the recyclers would like,” one Turkish mill source said, who expected prices for premium HMS 1/2 (80:20) to drop to $345/mt CFR in the week to July 28.
Post time: Jul-25-2023