Japanese traders have welcomed the Chinese government’s decision to allow ferrous scrap to be freely imported once again, though they stress that exports of Japanese material to China are not expected to rise soon. For now, Japanese dealers and exporters will be content to quietly monitor the situation, Mysteel Global was told on Wednesday.
China reopened its market to scrap imports starting January 1 with the adoption of new ‘recycled iron steel raw materials’ standards, as reported. Japanese scrap suppliers expressed their surprise at the speed with which Beijing moved to ease the remaining restrictions on the trade and welcomed the possibility of expanding their export sales.
Back in 2017, China’s central government had said it would ban the import of 24 kinds of waste from abroad including steel scrap and strive for “zero solid import” by the end of 2020. However, since July 2019, eight types of solid waste materials including steel scrap were categorized as being “under restriction” and their importation allowed under quota scheme, as Mysteel Global reported. From last Friday, most of those restrictions were lifted.
But Japanese traders are not in a hurry to start selling to Chinese customers, because they want to study how Chinese scrap consumers view Japanese scrap grades and quality. “We know the grade of scrap China can import but we don’t know if the quality is sufficient for Chinese buyers or not,” a scrap trader in Tokyo explained. “We will have to monitor cautiously and make sure that the materials from Japan are acceptable and that no possibility exists for our cargoes to be returned.”
A second trader in Tokyo agreed that China won’t become a big buyer of Japanese scrap soon. He said that the supply-demand balance of scrap in Japan has been tight and traders are already kept busy supplying their domestic buyers and existing overseas customers.
“We are happy to have new customers, but not for now,” he told Mysteel Global, saying that Japanese scrap exporters will simply start developing new sales bases. In Japan, the declining population and shrinking economic size will see domestic scrap consumption decline in the years ahead while South Korea, currently a key buyer of Japanese scrap, will become scrap exporter in the not-too-distant future, he added.
Many industry sources in China also believed that despite the reopening, the country’s scrap imports will not become active soon. Imports will also have a limited influence on China’s scrap market because international scrap prices are relatively high and not attractive to Chinese buyers.
The second trader in Tokyo confirmed that his company has started receiving inquiries from Chinese mills since the beginning of this week, seeking offers for Japanese scrap – mainly for HS and Shindachi materials – though as of late Wednesday, no booking was concluded. “Because our offer level is much higher than their target, they cannot agree to our prices,” he explained.
Current offers tabled by Japanese scrap suppliers for HS scrap exports are at around $500-505/t CFR China including about $25-30/t freight charge, equivalent to around Yen 49,000-49,500/t FOB. On the other hand, the bids from Chinese customers are at around $450-460/t CFR, according to sources.
“Chinese mills may become active to book Japanese scrap when Japanese prices decline, and it may be the time for domestic (Japanese) mills to fear new rivals in China,” the second trader noted. He added that Japanese mini-mills may have to protect themselves by ensuring their scrap buying prices don’t drop largely.
But the scrap market in China seems relaxed with the restart of imports because even before Beijing imposed restrictions on steel scrap imports, total annual imports averaged just 2-4 million tonnes – a relatively small volume given China’s huge market size. “Therefore, it is hard to see any significant improvement in the volumes of overseas scrap arriving in the near term,” according to a source in China.
Meanwhile, a Chinese mill was heard to have booked 3,000 tonnes of Japanese HS material on January 1 while a Chinese trader apparently concluded a booking of 4,000 tonnes of Japanese scrap (including 1,800 tonnes of HS material) immediately after China restarted importing scrap, Mysteel Global has learned.
Actual booking prices of these deals were not circulated, which led Japanese trading sources in Tokyo to speculate that as the parcels were likely for trial usage only, their prices were below market levels.
Written by Yoko Manabe, yoko.manabe@mysteel.com and Lindsey Liu, liulingxian@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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