Japan: Scrap export bids still under pressure, but suppliers unmoved

Bids for Japanese scrap have continued to head south since the last two months. However, the Japanese suppliers have shown less interest in lowering their offers further. On the other hand, the monthly Japanese Kanto scrap export tender was conducted on 9th Dec’21. The lower bids from participants resulted in the tender remaining inconclusive for the second consecutive month, SteelMint understands.

SteelMint’s price assessment for Japanese H2 scrap stands at JPY 48,000/t FOB basis, unchanged w-o-w.

Notably, the H2 grade price seems to have bottomed out for now, having fallen around JPY 6,500/t from the beginning of Nov’21. Lower bids from South Korea and Vietnam have continued to keep Japanese scrap trade on the lower side.

• Hyundai Steel lower bids for high grade: South Korean steel major Hyundai Steel slashed bids for high-grade Japanese ferrous scrap today. Bids have been reduced by JPY 2,000/t ($18/t) for shindachi bara scrap and JPY 500/t ($4/t) for HS grade, compared to the last bid on 10 Dec’21. Bids are now at JPY 56,000/t ($493/t) FOB Japan for shindachi bara and JPY 55,000/t ($484/t) for HS grade.

The company did not bid for the H2 grade, as the country’s largest automaker, Toyota Motors, has improved its production. Hence, demand for the higher grade over H2 grade has moved up.

• South Korean mills prefer domestic scrap: Meanwhile, other major steelmakers like Dongkuk and SeAH Steel are likely to prefer domestic scrap, owing to price parity and fast delivery of the material. Additionally, Dongkuk Steel’s Pohang plant would close its warehouse for the planned maintenance from 18 -20 Dec’21. Hence, material dispatch will get restricted for the time being.
• Vietnamese buyers stay away from market: Bearish domestic sentiments kept scrap buyers away from the market, while many steel mills chose domestic material at a lower price. Fresh offers for the bulk Japanese H2 are at $485-490/t CFR levels, slightly lower by $2-3 w-o-w.
• Bangladesh buyers continue to look for other sources:Bangladesh-based major mills continue to seek other prospective scrap sources. Recently, the country booked around 20,000-25,000 t of mixed bulk cargo from USA. The disparity in bids and offers is slowing down Japanese cargo bookings. Fresh offers for Japanese H2 are at $550-555/t CFR Chittagong basis.

Outlook
Japanese domestic scrap prices are likely to witness further correction considering the drop in export prices. Japan’s leading steel producer, Tokyo Steel, has reduced scrap purchase bids by JPY 500/t ($4/t) for three of its steelworks, effective from 16 Dec’21. Post-revision, the company’s bid price for H2 scrap stands at JPY 54,000/t ($475/t) delivered to Tahara, Utsunomiya, and Kyushu plants, while prices for the other two plants remain unchanged, as per reports. Notably, this is the company’s second price revision this month.

Yet, there is space for further price adjustment, owing to the wide gap between export and domestic prices in the Kanto region.