Hyundai Steel aggressively plans to cut rebar production by 60,000 MT amid excessive inventories and critical deficit at Incheon, Pohang and Dangjin factories in South Korea
South Korea’s leading EAF steelmaker – Hyundai Steel has abandoned its bids for Japanese scrap imports successively for the 2nd week. As per latest update received on this, Hyundai Steel has kept away from bidding for Japanese scrap owing to the mismatch between bids and seller’s expectations. Since mid-Apr’18, Hyundai did not present proper bid for Japanese scrap amid the sharp decline in finish steel demand in South Korea while its last H2 bid presented on 9th May’18 stood at JPY 33,000/MT (USD 302), FoB Japan. As per sources, Hyundai Steel has abandoned the bid this week again due to the market perception with Japanese suppliers.
Why has Hyundai Steel kept away from bidding for Japanese scrap?
1. Mismatch in bids & offers – Japanese domestic scrap prices have turned strong after monthly scrap export tenders like Kanto and Kansai Tetsugen fetched higher prices for this month. Sellers are now quoting H2 scrap at levels above JPY 35,000/MT, FoB Japan. Also, Japan’s leading mini mill Tokyo Steel raised scrap purchase prices at its Utsunomiya works four times this month. Now H2 at Utsunomiya fetches JPY 36,000/MT(USD 329) which is up by JPY 3000/MT (USD 27) as against JPY 33,000/MT earlier these price hikes.
2. Ample scrap inventories in hand with Hyundai Steel – Hyundai Steel couldn’t find any reason to exceed its earlier levels of JPY 33,000/MT, FoB for Japanese H2. About 700,000 MT scrap inventories available in hand might have supported Hyundai to remain away from the Japanese scrap purchases in last couple of weeks. Present inventories are 70% higher than the lowest last year and about 17% higher than the average inventories last year. Added to which the remaining contracts comprising around 400,000 MT Japanese scrap which would be sufficient for upcoming two months. Hyundai also contracted earlier this month for 3 USA and 1 Russian bulk scrap cargoes which are due for June-July’18 shipments.
South Korean Dongkuk Steel postponed its purchases of special scrap for this week which may present fresh bids in the upcoming weeks. Following the temporary stoppage of purchase of Japanese scrap from leading steelmaker Hyundai, other steelmakers’ buying activities for Japanese scrap likely to shrink for time being affecting the gap between supply and demand for Japanese grades like H2, H1/2 and HS.
3. Aggressive production cuts for rebar – Amid sharp fall in finish steel demand in South Korea, Hyundai Steel witnessed production cuts for rebar this month resulting in the less requirement of ferrous scrap for its steel production. In efforts to recover its profitability for finish products the company is planning to cut its rebar production by upto 60,000 MT for short period from late May to June’18.
If the production disruption caused by the recent plant failure in Dangjin factory in mid-May is considered then production cuts expected to cross total 80,000 MT rebar by June’18. Hyundai is showing strong commitment to cut rebar production one by one at all factories like Incheon, Pohang and Dangjin in South Korea.
4. Ample domestic scrap availability – Domestic scrap prices in South Korea which have increased by upto KRW 25,000-30,000/MT(USD 23-28) in past two weeks are likely to remain stable now amid slight oversupply situation because of falling scrap demand on rebar production cuts with major steelmakers in South Korea.
– Inputs from Steel Daily
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