Tight supply has pushed prices of high-grade scrap in Japan including those for Shindachi material (New cut) and HS grades up by another Yen 1,000/tonne ($9/t) over the past week to their highest level since 2008.
As of July 8, shippers at Tokyo Bay area ports such as Odaiba, Funabashi and Yokohama, were paying around Yen 60,000/t FAS for Shindachi grade and Yen 59,000/t FAS for HS, both up Yen 1,000/t on week and by Yen 5,000/t on month, according to scrap traders in Tokyo. In contrast, prices for H2 grade scrap were at Yen 48,000-48,500/t FAS, down by Yen 500/t on week but mostly unchanged on month.
Several factors have combined to lever Japanese high-grade scrap prices higher, a Tokyo scrap trader explained. For example, Shindachi material is mostly generated during the processing of virgin metal at the plants of manufacturers such as automobile body stampers and home appliance makers. But operations at some of these plants have been forced to slow down because of disruptions caused by the semiconductor shortage which, in turn, is reducing the volume of Shindachi scrap being generated, he said.
At the same time, Japanese special steel producers are being extremely aggressive to collect Shindachi material for their furnaces to meet existing stable demand for special steel products and for the expected growing demand from manufacturers once the IC chip supply bottlenecks are overcome.
For HS grade material, integrated mills inside and outside of Japan are lifting their consumption of HS scrap for environmental reasons – to offset some of their iron ore – and their demand is expected to grow further, Mysteel Global learned.
“The price gap between H2 and higher-grade scrap continues to widen, reflecting the supply tightness,” a second scrap trader in Tokyo observed. “The spread has already expanded to Yen 12,000/t, much larger than the gap by Yen 2,000-3,000/t a year ago.”
But at the other hand, the prices that the Japanese mini-mills are paying for H2 and for higher grade material are not showing that much of a difference. For example, Tokyo Steel Manufacturing, Japan’s leading mini-mill, is paying Yen 49,000/t for H2 material and Yen 51,000/t for Shindachi scrap at its Utsunomiya Works, north of Tokyo, according to the company’s list prices.
The second scrap trader explained that in their melts, those Japanese mini-mills making carbon steel products including Tokyo Steel consume about 80% heavy scrap such as H1, H2 and some HS, about 5-6% Shindachi, and the balance in other grades.
“So basically, they don’t need Shindachi as much as heavy scrap, and it’s the price trends of those grades they’re monitoring. But I hear that other mini-mills which make some special steel items have already started quietly negotiating with scrap dealers, offering as much as Yen 3,000-4,000/t more for Shindachi, so Tokyo Steel and other carbon steelmakers will also have to increase the prices they’re offering for higher grade scrap soon,” he predicted.
This trader noted that in their melts, special steel producers usually consume about 40% Shindachi, 20-30% turnings, and other grade materials the balance.
Written by Yoko Manabe, yoko.manabe@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Leave a Reply