Japan’s electric-arc-furnace (EAF) steel producers are considering to reflect higher scrap costs in their billet prices, especially when they have been receiving more orders from overseas, sufficient to run at a stable rate, even though the domestic demand has been weak for construction steel, according to officials from the EAF mills.
In East China, the bidding prices for Japan-origin SD295A or SD390 120-150mm billets are around $435-440/t, CFR as of early September, up by $10-15/t on month and about $50/t higher from early-Jul’20, market sources confirmed.
“We have shifted most of the higher scrap costs from the past two months to our billet export offering prices, but the Japanese scrap prices are expected to rise further, so we need to ready to lift our billet export prices again,” a sales official from a mini-mill in Osaka explained.
The company, however, out of precaution, has held back from offering billet for exports while waiting for the result from the latest monthly scrap tender, according to him.
The Kanto Tetsugen, an alliance of scrap dealers around Tokyo, will issue its monthly scrap export tender on 9 Sep’20, and the top winning bid for the tender on 19 Aug’20 was at Yen 27,285/t FAS, up Yen 3,685/t on month, as reported.
Japan’s billet export prices once dropped to $380-390/t, CFR in early-Jul’20 together with the declines in scrap prices, but it has since been recovering together in the close co-relation with scrap, according to the market sources.
Meanwhile, most of the Japanese billet exporters are not aggressive in achieving higher margins in exports but to sustain the production at a certain level to reduce operation costs, so “if we cannot shift scrap price rises quickly to billet export prices, we will be running at the losses, no point to export billet at all,” the Osaka mill official said.
The Japanese billet suppliers usually set the price gap of billet and scrap at around Yen 15,000-18,000/t for a sustainable level, or “we’d better stop exporting, and billet supplies from Japan will decline,” he explained.
Japan exported 124,117 t of billet in Jul’20, up 94.2% on the year and or 21.9% high on month, or above the threshold of 100,000 t for the sixth consecutive month, with the export price averaging Yen 38,981/t ($364/t) FoB, down Yen 8,742/t on year but up Yen 589/t month, and the total volume for Jan-Jul’20 was 750,795 t, up 50.9% on the year, according to the latest data by Trade Statistics of Japan.
Japan’s July Billet Exports by Country/Region
Among the top destinations, Japan’s billet exports to Taiwan surged the most in Jul’20, as Taiwan had to look for supplies from other countries including Japan when China exported little on its robust domestic demand, a Tokyo trader explained.
Thailand, the usual buyer of the Japanese billet, however, did not receive any tonnage in July, probably due to the country’s restriction on its economic activities in May-Jun’20 to battle against the COVID-19.
Over Jan-Jul’20, Japan exported 39,986 t of billet to Thailand down 51.8% on the year, according to the official data. The average capacity utilization during the month of August 2020 was 88%.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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