As per recent reports, South Korean leading steelmaker Hyundai Steel has discontinued spot purchases of Japanese scrap staying away from bidding for it amid high prices. The steelmaker seems expecting for lowering scrap imports amid short term surge in inventories. It has set guidelines for purchasing Japanese scrap from spot market holding purchase price for H2 at JPY 32,000/MT, (USD 287) FoB Japan at which the contract was concluded last week.
The steelmaker has decided not to pay more than JPY 32,000/MT, FoB Japan for H2 spot purchases despite Japanese local scrap prices have surged sharply on restocking ahead of Golden week holidays. Japanese scrap suppliers hold export offers at around JPY 35,000/MT (USD 313), FoB as recently a South Korean steelmaker located in the Southern region has booked H2 at JPY 34,000/MT, FoB Japan.
A Vietnamese trade source reported Japanese H2 is being offered in the range USD 345-350/MT, CFR Vietnam. Following improved demand, Japanese suppliers remained optimistic about high Japanese scrap offers.
What could be reasons behind Hyundai’s discontinuing of Japanese scrap imports?
1. Japanese scrap prices are overvalued – Hyundai Steel feels that Japanese scrap prices are overvalued at the moment. It attempts to lower the prices by stopping spot purchases. Though a decline in Japanese prices doesn’t seem easy, few reports assume that prices have peaked and may come down.
2. Tokyo Steel has stopped price hikes at Utsunomiya plant – Japan’s Tokyo Steel mill is paying currently as high as JPY 35,000/MT, (USD 313) for three of its major plants i.e. Utsunomiya, Tahara and Kyushu. However, in the last two price hikes, the steelmaker has stopped raising purchase price at Utsunomiya plant situated in the Kanto region. Hyundai steel anticipates that Japanese scrap prices could have entered short term peak.
3. Lowering profitability – Despite a sharp rise in domestic scrap prices in South Korea, there still remains a considerable gap between South Korean domestic ‘lightweight A’ scrap and Japanese H2 import price. Meanwhile, the declining profitability of steel products makes internal policy difficult to pay more than JPY 32,000/MT, FoB for H2.
Hyundai steel remains the largest buyer of Japanese scrap which imports around 2.5 MnT scrap every year comprising around 30% of total Japanese scrap exports per annum. Hyundai’s bidding for Japanese scrap is considered to be the benchmark for East Asian scrap market. Presently, the steelmaker is assumed to be purchasing around 40-50% of its total import volume through spot purchases which have been stopped for time being.
In addition, Hyundai Steel seems active in working on Joint-yard bulk contracts and long term relationship from suppliers in US and Russia. The company has procured decent bulk cargoes in the last couple of months.
~Inputs from Steel Daily
Leave a Reply