LME Taiwan scrap contract quadruples on month in May

The London Metal Exchange's (LME) steel scrap cfr Taiwan contract, which is based on Argus' cfr Taiwan HMS 1/2 80:20 index, saw a strong May because of conflicting market indicators, underscoring the importance of hedging in a price-volatile market.

The contract concluded the month at 255 lots, or 2,550t, marking a 347.4pc spike over April's traded volume. Based on the monthly average of the underlying index — Argus' HMS 1/2 80:20 cfr Taiwan — approximately $910,000 were traded in May.

May was the second-highest monthly clearance so far this year behind February, which saw 833 lots traded. In total, 1,232 lots were traded between January-May this year, more than treble compared with the same period in 2022. The average monthly traded volume in 2022 was 125 lots.

In the physical spot market, a differing outlook between buyers and sellers led to some price volatility in May. The index price fell to $350/t on 4 May, marking a five-month low since 6 December at $343/t, before rebounding to end the month at $364/t. Argus assessed the HMS 1/2 80:20 containerised price at $360/t on Monday, down $20/t year to date and $78/t year on year.

Seasonality factors such as energy restrictions, weak steel demand, inclement weather and an influx of competitively priced billets from China, Russia and Indonesia have led buyers to adopt a cautious approach on scrap procurement, but sellers remain unfazed at a time of a tighter supply of containerised scrap out of the US west coast.

Trade sources say that hedging has become increasingly important in a price-sensitive market, adding that Taiwan's imported scrap prices have long been a key reference for scrap market participants.