South Korea’s ferrous scrap import observed a steep decline of 33% and stood at 0.81 mn t in Q1 CY’21 against CPLY. Notably, scrap imports have dropped to a five-year low, as per the data maintained with SteelMint.
Similarly, monthly scrap imports were recorded at 0.29 mn t in Mar’21 as against 0.34 in Feb’21, lower by nearly 15% m-o-m. Japan was the largest supplier at 0.61 mn t in the first quarter of 2021, down by 23% as compared to 0.79 mn t in Q1 CY’20, followed by Russia and US at 0.1 mn t & 0.05 mn t respectively.
Reasons for the decrease in scrap imports-
- Imports from Japan fell – Due to the hike in freight rates, Japanese scrap export trades have slowed down. Increased freight rates and less vessel availability are posing additional risks at the moment. Hence, scrap offers declined further.
- Prices shot up in Feb’21 – Monthly average of SteelMint’s price assessment for Japanese H2 scrap export rose slightly by JPY 2,925/t m-o-m to JPY 40,075/t ($370) FoB in Feb’21.
- Local scrap market provided adequate quantities- South Korean mills acquired most of their scrap requirement from the domestic market, reducing seaborne purchases.
- Automotive production declined- South Korea produced 333,848 vehicles in Mar’21 down by 9.5% y-o-y due to the shortage of automotive semi-conductor chips and also pandemic which affected the production in Q1’20, as per the Ministry of Trade, Industry and Energy. Meanwhile, the sales and exports in Q1’21 increased by 11.3% and 16.9% respectively.
Outlook- Freight volatility and vessel availability may be a matter of concern for South Korean mills. However, considering global trends, mills have raised bids for Japanese and Russian scrap for May deliveries. Last week, Hyundai Steel has increased its bid price for Japanese scrap by up to JPY 4,000/t, sources have confirmed to SteelMint. The bid for H2 is now set at JPY 43,000/t ($395) FoB level, up by JPY 3,000/t ($27) against the last bid which was on 26th Mar’21.
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