A trade for 2,000 lots, equivalent to 20,000 mt, went through on the London Metal Exchange's January scrap contract Thursday, sources involved in the trade told S&P Global Platts.
This is the largest single clip in the contract's history and, coincidentally, was done on its second anniversary.
The trade was done off-screen over the phone, and was likely direct and not through a broker, one trader said.
Several derivatives sources said it was a physical hedge, with one trader speculating it could be a fairly large North American seller -- any cargo sold out of this region now would be arriving in January, and the trade is $16/mt above the Platts-TSI underlying assessment, which was $314/mt CFR Turkey on Wednesday.
This would suggest it was a physical seller from somewhere, locking in the price.
A broker said it could well be this American seller, via a large bank, that has been very active on the contract.
The trade is "further evidence of the development of this contract," one trader said.
"As base liquidity grows reducing the risks that come with a lack of liquidity the 'max size' people will consider will grow with it," he added.
In recent times many sources have said the scrap contract needed more physical participants to continue gaining traction, so if the trade was done by a scrap seller, in America or elsewhere, it could be a significant milestone.
A fairly large European seller also confirmed his company -- which exports over 1 million mt/year -- was interested in using the contract going forward.
There was a record volume of trading for a single day on LME's ferrous scrap contract last month, with a total of 7,129 lots traded on October 13, equivalent to 71,290 mt.
The contract is based on the daily Platts TSI Turkish imports of premium heavy melting scrap I/II (80:20) index.
