Highlights
Annual trading volumes exceeds 8 MMt
LME eyes 15 mil mt volume total for full-year 2024
Year-to-date trading of CFR Turkey scrap futures contracts on the London Metal Exchange reached an all-time annual high after reaching 8.32 million metric tons, accordig to the latest data to Aug. 28.
The trading volume of LME CFR Turkey scrap futures for the year up to August totaled approximately 831,745 lots, or 8.32 MMt, and the highest annual trading volume since the contract was launched in November 2015. This was up from 8.08 MMt for the full-year 2023.
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.
The average daily trading volume over 2024 to date totaled approximately 48,926 metric tons as of Aug. 28, up from an average of 31,219 metric tons recorded throughout 2023.
"Average Daily Volumes for the LME Steel Scrap CFR Turkey (Platts) futures are up almost 60% in 2024 to date -- this growth rate is extremely encouraging given the unusually subdued price volatility of the past five or six months," Alberto Xodo, product specialist (Steel & Nickel) at the LME, said. "As volatility returns to the market and a strong pipeline of new participants are onboarded to trade, we expect to see liquidity growth accelerate, and hope to see volumes for the year cross the 15 million tonnes threshold."
July registered the lowest monthly LME CFR Turkey futures contract trading volume in 2024 at 845,180 metric tons, with market sources reporting that low price volatility in the physical scrap market during the month had reduced interest in scrap futures trading. However, the trading volume for July 2024 was still higher than ten of the 12 months in 2023.
In July, Platts assessed Turkish import HMS 1/2 (80:20) prices within a tight range of just $388-$390/t CFR throughout the month, as the physical market demonstrated remarkable price stability amid finely balanced market fundamentals.
"The surge in LME Turkey scrap futures volumes reflects not only the increasing demand for recycled materials but also a broader shift towards sustainability and resource efficiency. As the market adapts to these changing dynamics, the unprecedented volumes underscore the evolving role of scrap in meeting the world's metal needs," Robert Belcher, head of steel at broker Freight Investor Services, said.
"The use of hedging and futures is mounting with bigger liquidity which makes derivatives an effective tool to hedge risk and to ride market trends when activity in the physical market slows down," Marco Micciche, CEO at steel and raw materials trading house Eusider said.
"The LME also allows physical traders to exploit some arbitrage between the forward curve and physical prices -- for example when futures are in a steep backwardation or contango versus the daily Platts assessment -- and their market view predicates the chance to speculate on the spread," Micciche said.
Platts, part of S&P Global Commodity Insights, assessed the LME September contract at $366.50/t on Aug. 28. The October contract was assessed at $366/t, while the November contract was assessed at $368/mt on Aug. 28.
Spot prices for physical imports of premium heavy melting scrap 1/2 (80:20) stood at $363.50/t CFR Turkey on Aug. 28, as sources reported improved adjacent market sentiment and a firmer sell side largely expectant of a continued recovery in prices, sources said.
