Japan’s domestic ferrous scrap prices corrected downward in mid-Janaury after having been on an uptrend since July, as domestic steel mills in Kanto around Tokyo cut their scrap procurement prices by Yen 1,000-2,000/tonne ($9.6-19.3/t) starting January 11 to cool down the frenzy in the market, though many scrap traders in Tokyo expected this to be short-term and the correction will be minor.
Tokyo Steel Manufacturing, Japan’s top electric-arc-furnace steel producer, has trimmed its steel scrap buying prices of all grades for its Utsunomiya works in north of Tokyo by Yen 1,000/t effective January 14, and the works is paying Yen 42,000/t for H2 grade scraps after the adjustment. Tokyo Steel has not revised scrap procurement prices for its other three works or steel service center.
This has been the first scrap price cut at Utsunomiya works after having raised the scrap prices by a total of Yen 21,000/t over July 17-December 26 or having doubled the H2 scrap price in half a year, Mysteel Global noted.
“Tokyo Steel’s steel product prices have not risen as much, so the scrap price cut is part of the efforts to narrow the gap when the mini-mills are raising their steel prices at the same time,” a scrap trader in Tokyo explained.
Tokyo Steel raised its finished steel prices for January sales by Yen 10,000/t or a total of Yen 17,000/t since July 2020, and it will release its list prices for February sales on January 18, Mysteel Global understood from the company.
A procurement official from a mini-mill in Tokyo grumbled that the Japanese scrap prices have surged too high and too fast, and all the domestic scrap buyers including mills and shippers at the bay area will attempt to see whether they can bring down the prices even the chances may be slim.
“The winning bid in the monthly scrap tender on Wednesday was much higher than expected, and many viewed it too high to be realistic, so instead of raising the prices, many other mini-mills and shippers have followed Tokyo Steel to test for lower prices,” he explained.
The winning bid in the auction hosted by the scrap dealers around Tokyo on January 13 was at Yen 44,751/t FAS or equivalent to around Yen 45,500/t FOB, which was first time since September 2008 for the price to have exceeded Yen 40,000/t FAS, as reported.
Some scrap distributors that have been holding onto their stocks have started delivering tonnages to their customers on noting the softening in prices, so the scrap arrivals at the mini-mills have grown in volumes, the Tokyo mini-mill official shared.
A second scrap trader in Tokyo anticipated the downward adjustment in the scrap price may be modest, as “overall scrap supply has remained tight, and mini-mills in western Japan are still actively sourcing scrap from eastern Japan, so the scrap prices may not drop below Yen 40,000/t,” he said.
As of January 15, mini-mills around Tokyo are paying Yen 41,500-42,500/t, and shippers at the Tokyo Bay area, the key ports for scrap exports and delivery to the domestic mills in western Japan, are paying around Yen 41,000-42,000/t FAS, both for H2 grade scrap and down Yen 2,000/t on week, market sources shared.
Written by Yoko Manabe
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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