Cleared volumes on the London Metal Exchange's ferrous scrap contract reached a new high in February with 54,883 lots of 10 metric tonnes per lot cleared, according to preliminary data published by the bourse.
Futures activity surpassed the 500,000 mt barrier for only the second time ever, with November 2017 the other occasion the milestone was reached.
February also saw the single largest trading day on record, with over 10,000 lots cleared on February 15.
In the context of the physical market, February volumes equate more than 13 Handysize cargoes and approximately 30% of the average monthly (physical) volume imported by Turkey, the largest scrap importer, in any given month, based on 2017 figures.
This marks a strong rise from last year when cleared volumes on the LME contract averaged around 13.5% of the physical market in any particular month.
"The beginning of 2018 has seen a continuation of last year's extreme price volatility, so it's not surprising to see continued uptake of the LME's ferrous contracts by the physical industry," said Phillip Price, Ferrometrics CEO and market-maker on the contract.
Indeed, after a decent start to 2018, physical spot prices dived around $30/mt. More recently those losses have pared with prices rebounding almost $20/mt, owing to firm demand fundamentals.
S&P Global Platts TSI assessed the heavy melting scrap 1/2 80:20 CFR Turkey at $362.50/mt on February 28, up $1.50/mt on the day.
Recent strength in scrap prices was demonstrated by a flurry of cargo sales at increasingly higher levels; Platts recorded transactions equating to 1.14 million mt of deepsea material over the month, most of which were destined for March delivery.
European merchants previously warned of a shortfall in supply in the coming months given February's strong showing and potentially exacerbated by reduced collections as harsh weather conditions persist over northern Europe and the Baltic.
Finished steel demand also remained robust -- rebar prices reached $580/mt FOB Turkey Wednesday, the highest since late 2013.
A buoyant domestic rebar market in Turkey fed through into higher export prices in recent weeks despite concerns over the outcome of the Section 232 investigation in the US, a key end-user market for Turkey's rebar exporters.
This bullishness was evident throughout February, with scrap futures on occasion offered $20/mt higher than physical spot prices for delivery in the same month of expiry.
Ferrometrics' Price noted an increase in technical trading activity was having a "positive impact" on the structure of the forward curve, while another broker observed the steel industry's "growing interest in risk management tools."
