Japan: Scrap export offers fall to 18-month low; trades yet to improve

Japanese scrap export offers continue to exhibit downward trends for yet another week. Market participants believe that the downtrend is likely to continue for the time being as prices have hit an 18-month low, as per SteelMint assessment.

Moreover, the Obon holidays will continue from 10-16 August, 2022 in Japan and repair and maintenance work is scheduled for major electric furnace steelmakers in August. Scrap demand is expected to decline significantly. Japanese suppliers anticipate production cuts of 20% in the Kanto region and 40% in the Kansai region, as per reports.

SteelMint’s assessment for Japanese H2 scrap export prices stands at JPY 38,000-39,000/t ($285-293/t) FOB, down by JPY 2,000-3,000 ($15-22/t) w-o-w.

Market overview

• South Korean mills remain quiet: South Korea’s major mills such as Hyundai Steel which had bid for Japanese material at JPY40,500/t last week did not bid this week. Steelmakers are waiting for further correction in prices due to uncertain market situation.

In contrast, South Korean steel majors have cut domestic scrap purchase prices, as per SteelDaily. POSCO will cut prices by KRW 20,000/t ($15/t) for all grades for the Pohang and Gwangyang works. Hyundai Steel and Dongkuk Steel will slash prices by KRW 10,000/t ($8/t). The former will cut prices for its Incheon and Dangjin steelworks while the latter for its Incheon plant. The distribution of domestic scrap is still high and the price of domestic scrap is weak.

• Vietnam’s scrap trade mute: Vietnam’s imported scrap trade remained mute for yet another week. Steel producers are cautious due to the unstable economy, low finished steel demand and banking problems. Limited credit availability from banks has kept the imported scrap market dull. Indicative bulk H2 offers from Japan are at $345-350/t CFR, down $20-25/t from Monday.
• Bangladesh away from Japanese market: Indicative offers for Japanese bulk H2 material were at $420/t CFR levels earlier in the week. However, buyers remained quiet, waiting for clearer market direction.

Japan’s Tokyo Steel cuts purchase prices: Tokyo Steel has reduced scrap purchase prices twice this week by around $30/t. The company has reduced bids by up to JPY 4,000/t ($30/t) for all its plants. After the second adjustment, bid prices for H2 scrap are at JPY 44,000/t ($322/t) delivered to the Tahara plant, and JPY 43,000/t ($315/t) for the Utsunomiya works.

Outlook: Japanese scrap export prices are likely to fall further on dull demand and lower bids from overseas markets.