- Sharp tender surge surprises seaborne market despite rising freight costs
- Tokyo Steel raises scrap purchase prices by $9/t following strong Kanto tender results
Japan’s Kanto Tetsugen export tender extended its strong upward momentum in April, reaching its highest level since March 2023 and marking the ninth consecutive monthly increase. The tender saw 10,000 t of H2 scrap awarded at JPY 54,329/t ($342/t) FAS, up by JPY 4,208/t ($/t) m-o-m, equivalent to around JPY 55,300/t ($348-350/t) FOB Japan.
The sharp rise surprised the seaborne market, as most overseas buyers had been targeting levels below JPY 51,500-52,000/t FOB prior to the tender, even as available offers remained limited. The cargo under April contracts is scheduled for vessel loading, with completion expected by 31 May.
“The result is far above our expectations and the material is less so freight charge per tonne will be high for this particular shipment,” a market participant noted, showing the disconnect between buyer expectations and seller price indications.
The cargo is likely to be shipped to Vietnam, BigMint learnt from most market participants. However, some market participants believe that it could go to Bangladesh with some other grade additions with H2 like Shindachi cargoes to reduce/optimise freight costs. However, buying interest from Bangladesh remains weak due to high freight and overall landed cost concerns.
A Japanese trader commented, “Export negotiations will become increasingly difficult due to the widening price gap.” Participants pointed to growing challenges in aligning bids with elevated Japanese offers.
Domestic market support and price alignment
In the domestic market, H2 scrap prices were heard at around JPY 51,000-52,000/t ($320-327/t), while dockside collection prices stood at JPY 51,000-51,500/t ($320-323/t) FAS.
Market participants were closely watching how Tokyo Steel would respond to the higher tender outcome. As expected, Tokyo Steel increased its scrap purchase prices by JPY 1,500/t ($9/t) across all plants, with Tahara, Nagoya, Okayama, Kansai, Kyushu, Utsunomiya, and Tokyo Bay yard all reaching JPY 52,500/t ($330/t). The increase followed the firm rise in April’s Kanto export tender and continued strength in domestic demand and overseas markets.
Export prices have also strengthened, with H2 FOB Japan levels at JPY 52,000-53,000/t ($327-333/t) as of 9 April, compared with a March monthly average of around JPY 49,500/t ($311/t) FOB, indicating a clear upward trend.
Global parity and buyer resistance
Market participants highlighted growing challenges in export competitiveness. According to a Vietnamese trading source, with rumours of a Vietnamese mill purchasing US-origin HMS 80:20 at $400/t, the implied H2 parity stands near $390/t CFR Vietnam (HMS 80:20 typically priced $10/t higher than H2). This suggests Vietnam is only workable up to $390/t CFR, limiting upside potential for Japanese cargoes at current levels.
“Vietnam can pay up to $390/t CFR for H2, but beyond that it becomes difficult,” the source added, indicating a clear cap on buying interest despite firm global sentiment.
Outlook
The strong tender outcome is expected to push Japanese export offers higher in the coming days. However, uncertainty remains over whether overseas buyers can match these levels, especially amid high freight costs and widening parity gaps. The next Kanto tender is reportedly scheduled for the second week of May (around 9-11 May), which will be closely tracked by market participants for further direction.
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