South Korean steel mills are changing the way in which they purchase ferrous scrap from Japan, as per a Steel Daily report.
The Korean mills have started booking scrap at very low volumes and then adopting a wait-and-watch policy with the expectation that prices will come down before they resume trading in higher volumes of the material.
It is common for major steelmakers such as Hyundai Steel, SeAH Besteel, and POSCO to have a clause in the contract of the lowest offer price if the quantity they expect to purchase at the bid price goes beyond the available quantity.
It is to be noted that South Korean steel major Hyundai Steel had slashed bids for Japanese ferrous scrap in mid-Nov’21. Bids have been reduced by JPY 2,000/t ($18/t) for H2 grade scrap compared to the last bid on 5 Nov’21. Bids stood at JPY 49,500 ($438/t) FOB Japan. Japanese domestic scrap procurement prices have inched down following global trends and declining bids from overseas buyers.
“As the number of cases of signing contracts in the order of lowest offer price increases, Japanese suppliers have become more cautious in their offer prices,” said a source.
Korean steel mills participate in the bids because the purchase volume per bid is very small, and many of them who follow this process are now failing to sign the contracts. However, there are also complaints of mills ‘bidding to understand the market conditions’ because some steelmakers do not mention the background of their rejection.
Meanwhile, as the gap between the offer price and the actual contract price has increased, there is widespread uncertainty over steelmakers’ offer prices.
In the case of Hyundai Steel, even if the bid price is JPY 4,000-5,000($35-44/t) lower than the offer price, there are many quantities that respond to the bid, so it is challenging to judge the price range of Japanese iron scrap suppliers based on the offer alone.
- Japan scrap exports up 11% in Oct: Japan recorded 0.49 million tonnes (mn t) of overseas sales of the material in Oct’21 as against 0.44 mn t in Sept’21, up 11% m-o-m, as per customs data maintained with SteelMint.
The m-o-m rise in exports in Oct’21 from the country was due to easing of lockdown in major importing countries like Vietnam and Bangladesh. Also, imports by South Korean mills saw an increase.
- Steel mills reduce domestic scrap purchase prices: Hyundai Steel lowered its scrap purchase prices in end-Nov’21 for the Incheon and Dangjin works by up to KRW 10,000/t ($8/t).
For the Pohang steelworks, too, prices of all grades have been reduced by KRW 10,000/t ($8/t).
South Korean special steels producer SeAH Besteel has also lowered purchase prices for all grades by a similar margin, effective from 18 Nov’21.
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