Daily Market Note — 2026-08-06

Market commentary on the global ferrous scrap trade. Not trading advice.

The read

Two things happened today that point in opposite directions, and separating them is the whole exercise.

Shipping through the Strait of Hormuz collapsed from eight vessels on Tuesday to two on Wednesday. Traffic through Bab el-Mandeb fell from about twenty vessels to one. Against the pre-war Hormuz norm of roughly 130 to 140 transits a day, two vessels is about 1.5% of normal — the lowest reading since this corridor began to be tracked here.

The Bab el-Mandeb figure is the genuinely new part. Through the past fortnight that route had been the one still functioning; it has now fallen by roughly 95% in a single session. For the first time both corridors are effectively shut at once, which matters more than either number alone: a carrier avoiding one route has historically absorbed congestion or longer transit on the other. That option is currently much thinner.

Meanwhile the diplomacy advanced. Iran and Oman agreed on navigation coordinates — not an operating agreement, and no reopening schedule was confirmed. Traffic fell 75% on the same day the coordinates were settled, which is about as clean an illustration as one could ask for that announcements and throughput are independent variables.

Brent crude traded near $79.91 — still below $80. That combination, a cheap barrel alongside a closed corridor, is worth pausing on. Bunker fuel is an input to a carrier’s cost; war-risk insurance is a separate charge driven by whether underwriters observe safe passage. This week the two have moved in opposite directions. Lower oil is not, on its own, a reason to expect lower shipping costs into South Asia.

Key moves

In ferrous, the forward curve was published in a cleaner form than it has been for some time — dated, labelled by calendar month, and each contract quoted once. The LME Steel Scrap CFR Turkey August 2026 contract closed near $373.50 per tonne on 5 August, with September near $377.00. Against the strip valid two sessions earlier, that is essentially flat — August down about $0.15, September up $0.50.

That flatness is itself the news. The curve had fallen $10–15 across every tenor into early August, fallen again on 4 August, and inverted at the back end. It has now stopped falling. One should not over-read a two-session pause, but it is the first stabilisation in a fortnight.

On the physical side, the latest publicly reported ex-UK HMS 1/2 80:20 range remained near $368–370 per tonne CFR Turkey. A late-July ex-Sweden booking was reported around $376 — worth noting as an origin spread rather than a market move, since Scandinavian material has historically carried a premium over UK cargo.

Commentary today described the gap between physical business and the front of the derivatives curve as having narrowed materially. That deserves a caveat. The front contract at $373.50 sits $3.50 to $5.50 above the ex-UK physical range; two sessions ago the front month sat about $5.65 above the same physical level. Genuine narrowing is therefore around $2 at the midpoint and close to zero at the bottom of the range. The larger convergence appears mainly if one compares today’s front month against the second-month references quoted last week — which is a change in the contract being quoted, not the market moving together. When reading a physical-versus-futures comparison, it is worth checking which tenor is on the other side of it.

Supporting the softer tone: Turkey’s manufacturing PMI was 47.7 in July, still in contraction, with weak orders, output and employment. 62% Fe iron ore CFR China fell about 4.15% over the referenced week, and Chinese hot-rolled coil and wire rod were both weaker. Turkish rebar was broadly stable to slightly firmer and Russian billet stable.

The picture that emerges is consistent: scrap is currently supported by logistics and supply constraints rather than by finished-steel demand.

Pakistan imported 323,896 tonnes of steel scrap in June 2026, sharply higher year on year. Reporting this week indicated that Pakistani buyers were delaying September bookings while waiting for lower scrap prices, with South Asian imported scrap trading subdued through 5 August. Bangladesh remained weak on poor finished-steel sales and monsoon disruption, with a stated preference for domestic material. India showed weak downstream demand and subdued sponge iron trading; domestic direct-reduced iron and local scrap remain cheaper metallic inputs there, so Indian import levels are a poor proxy for Pakistani ones.

Freight and shipping

No reliable live public origin-to-Port-Qasim container rate was available from the UK, Belgium, Netherlands, Germany, the Baltics, Canada or the US East Coast — a tenth consecutive session without one. Published container indices were not refreshed this week; the most recent readings date from 30 July and are now stale.

Useful arithmetic for anyone converting a container charge into a per-tonne cost: $250 per container is about $9.26 per tonne at 27 tonnes and $10.00 at 25 tonnes; $500 is $18.52 or $20.00; $1,000 is $37.04 or $40.00. Lighter-loading boxes absorb the worse per-tonne impact, which makes loading discipline a cost lever rather than a logistics detail.

Reported carrier war-risk surcharges from earlier in this conflict included figures around $1,500 per standard container and $3,500 per reefer or special box, though current applicability to South Asian routings is unconfirmed. At 25 to 27 tonnes, a $1,500 charge works out at roughly $55 to $60 per tonne — large enough to change the economics of a cargo entirely, which is why the question of whether such a charge can be applied after a booking is confirmed matters as much as its level.

A quotation worth relying on should state line, service, routing, transshipment port, transit time, rollover risk, equipment availability, payload, free time at both ends, rate validity, every surcharge, and what happens if a box is discharged at an alternative port.

Supplier markets

No current public buying sheets were available from the major European and UK processors, and no verified overnight advisories were found from most container lines. Absence of a published advisory is not evidence that pricing is unchanged — it usually means nothing has been published, which is a different thing.

Sellers quoting above the current physical range can reasonably be asked to explain the grade mix, inland collection cost, port cost, shipment month and freight basis behind the difference. August holidays typically reduce European collection, and high freight uncertainty discourages exporters from offering long validity — both of which are genuine reasons for firmness, and both of which are checkable.

South Asian ship recycling is worth watching alongside imported scrap. End-July indicative demolition levels were roughly $465–475 per light displacement tonne for Bangladeshi wet tonnage and $463–473 for Pakistan, with container vessels at a premium and dry tonnage at a discount. Because the two markets price within a couple of dollars of each other, currency, beaching capacity, local rebar sales and regulatory approvals decide where tonnage goes. Demolition steel is a domestic substitute for imported heavy and re-rollable grades specifically — it does not compete with shredded or prepared grades.

On policy, EU restrictions on qualifying non-hazardous waste exports to non-approved non-OECD destinations apply from 21 May 2027, with the first approved-country list due by 21 November 2026. A possible EU aluminium scrap export-control proposal is calendared for September 2026 — flagged as possible rather than confirmed, but notably nearer than the other dates, and material-specific rather than destination-based. Separately, the United States has authorised restrictions on selected critical-mineral-rich e-waste and used batteries; this is not a general ban on copper cable or ferrous scrap. India’s aluminium recycling industry has asked for removal of the country’s 2.5% basic customs duty on aluminium scrap.

Non-ferrous snapshot

Copper is the clear story, and today it acquired the evidence it had been missing.

LME copper cash settled near $14,167.50 per tonne on 5 August, with three-month near $14,055. Cash therefore sits about $112.50 above three-month — a backwardation, meaning the market is paying a premium for metal available now rather than later. For context, that same spread was around $33 per tonne in late July: it has widened roughly three and a half times.

This matters more than the headline price. Copper has rallied several hundred dollars a tonne over the past week, and a rally can mean quite different things depending on what the spread does alongside it. A rising price into a narrowing backwardation suggests positioning or a broad macro move. A rising price into a widening backwardation is the ordinary signature of genuine physical tightness at the front of the market. This week it is clearly the second.

Two supporting figures point the same way. LME copper stocks fell to about 231,825 tonnes, down roughly 12,200 tonnes from 3 August — extending a decline that has run since May. And copper concentrate treatment charges remain deeply negative, which indicates tight concentrate supply and margin pressure on smelters. That last point is about the future refined supply pipeline rather than current inventory, so it is a genuinely separate leg of the argument.

Aluminium futures remain below their June peak, with Chinese and Indonesian supply continuing to offset part of the Gulf disruption. Physical premiums are again described as firmer than futures — a claim that has now been made for eight consecutive sessions without a premium figure ever being attached to it, which limits how much weight it can carry.

Zinc import volumes into China fell sharply as domestic smelting expanded. Zinc remains important to brass valuation but is not currently as strong an independent driver as copper — a statement about the relative quality of the evidence rather than a forecast. China imported 147,000 tonnes of refined lead in the first half of 2026 against 17,000 tonnes a year earlier, with scrap shortages constraining secondary production, though LME lead stocks remain high, which limits a straightforwardly bullish reading. Nickel remains affected by Indonesian supply and quota changes.

One practical consequence of a backwardated copper market: for anything priced off a copper formula, the pricing date matters as much as the assay. A prompt reference and a forward-averaged reference give materially different answers when cash trades $112.50 above three-month.

Glossary

• CFR — Cost and Freight; the price includes shipping to the buyer’s port.
• HMS 80:20 — Heavy Melting Scrap, an 80/20 mix of two grades; the most common bulk ferrous scrap traded.
• Forward curve — the set of prices for future delivery months. It shows expectation, not transacted value.
• Tenor — which delivery month a quoted price refers to. Comparing different tenors can create the appearance of a move that did not happen.
• Backwardation — when the immediate price sits above the forward price; generally a sign the market is paying up for metal available now.
• Contango — the opposite of backwardation: forward prices above the immediate price.
• Treatment charge — what a smelter is paid to process concentrate into refined metal. Negative charges indicate concentrate is scarce.
• LDT — Light Displacement Tonne, the unit in which ships are sold for recycling.
• Bunker — marine fuel. Its cost feeds into freight rates, usually with a lag of weeks.
• War-risk premium — an insurance surcharge applied to voyages through areas of conflict risk.
• PMI — Purchasing Managers’ Index; readings below 50 indicate contraction.
• HS code — the international tariff classification that determines what duty a cargo pays on import.