stable raw material sector hasnt helped the scrap futures
markets, which barely had a pulse last month.
volume for CME Groups U.S. Midwest No. 1 busheling
ferrous scrap futures contract fell to zero from 2,500 gross
tons in July.
"The problem is
futures have not done well when prices are stable. The
sentiment is relative and carries over to other commodities," a
futures broker said.
The CME contract is
AMMs Midwest Ferrous Scrap Index for No. 1
busheling, which settles on the 10th of each month.
September settled at $400.07 per ton (
amm.com, Sept. 10), down 2.4 percent from $409.95
There are no signs on
the horizon of a healthy bump in prices, which lessens a need
for a player to mitigate risk and take a position in the
futures market. Septembers bids are at $395 per ton with
offers at $405, compared with $400 and $415 per ton,
respectively, in August.
The stability in the
domestic ferrous scrap market is partially due to weaker demand
for U.S. exports. "The market has been more stable because of a
prolonged lack of exports of any material consequence," the
broker said. "Without an impact by exports, the scrap market
has been left to the fundamentals of the market to determine
There also is a
sentiment that ferrous scrap may be at its peak. "Scrap has
stayed remarkably stable but dealers feel there is a
significant chance that numbers could go lower, and it
doesnt make sense to lock in at the current numbers," the
broker said. "There is not a lot of risk to upside of the scrap
market going forward."
If there is a downside
to prices on the horizon, scrap suppliers could benefit from
locking in a position at higher numbers to protect themselves
from falling prices.
futures also lacked liquidity in August because even though
price increases were announced, many on the buy side believe
they will be short-term, the broker said.