This week saw the start of trading activity on the London Metal Exchange's (LME) new futures contract settled against the Argus cfr Taiwan (containerised HMS 1/2 80:20) scrap index.
The first trades were done on the LME Select platform on 16 August. Three trades representing a total of six lots (60t) were done for the September 2021 contract, with two of them at $442 and one at $442.50. As the trades were done electronically on LMEselect, between clients and liquidity providers, no broker was involved. The identity of the clients were unknown.
Taiwanese steel mills' buying interest in the physical market for imported scrap fell sharply over the past two days on a rapid drop in China's domestic steel spot and futures markets. Spot iron ore prices are hovering at around $130-140/t, at relative lows not been seen since December 2020. This is prompting mills to regard scrap prices as having to fall as steel prices drop on lower production costs.
The new LME contract was launched on 19 July and cash settles against the monthly average on Argus' ferrous scrap HMS 1/2 80:20 containerised cfr Taiwan price. It was launched along with a range of other contracts, including European hot-rolled coil and aluminium used beverage containers, both also settled against Argus assessments, and an Indian scrap import price.
