Steel scrap prices have expectedly dropped in the Far Eastern market in the last days of April. Lower buying activity in the global scrap market has enabled local steelmakers to take over the initiative in setting prices.
Amid worsening regional markets for long products, most customers, which can use the material from stock or buy it from local scrap collectors, have preferred to refrain from scrap imports. Furthermore, even those mills that have continued to import the material have managed to knock down the prices.
Thus, the most recent deals for Japanese HMS 2 with a number of small producers have been closed at JPY 38,500/t fob ($410-415/t), by an average of $10/t lower than the previous offers. Local traders estimate the total shipments will be about 20,000t. Including freight rates, South Korean steelmakers have paid JPY 40,500/t c&f ($432/t) for the Japanese material, while previous transaction prices were closer to $440/t c&f.
Noteworthy, one of major South Korean producers Hyundai Steel has changed its buying structure and switched from direct negotiations to tender purchases. Results of the tender will be known on April 28 but market players expect the producer will buy the material of HMS 2 grade at JPY 38,000/t fob ($405/t). At the same time, given high stocks of the company, the imports may be small.
Japanese exporters are so far unlikely to suffer more losses due to steadily strong domestic market where largest steelmaker Tokyo Steel keeps buying HMS 2 at JPY 40,000/t ($430/t). Besides, despite rather high purchases, the company will hardly reduce its bids before the eleven-day holidays. During this period, electricity prices to steelmakers are reduced and so they try to increase production. Thus, the producer will not dare to risk stable supplies of raw materials. Noteworthy, even mills producing longs, which are in lower demand than other products, are in no hurry to cut prices and prefer to reflect higher scrap costs in finished product quotations in order to keep the market balanced.
Prices for scrap are falling at somewhat higher pace in Taiwan. Local steelmakers are buying HMS 1&2 (80:20) material at $428-435/t (TWD 13,400-13,600/t) delivered, by $13-16/t (TWD 400-500/t) lower than a week ago.
Market players say scrap prices keep sinking due to weaker demand for rebar and semi-products in the Far Eastern region. Moreover, the decrease in import scrap prices has also impacted costs of the domestic raw material. In particular, Taiwanese buyers have been booking containerized HMS 1&2 (80:20) scrap from the USA at an average of $410/t c&f against $430-440/t c&f a week before.
Demand for Japanese scrap is still very low in Taiwan. There have been very few deals with Japanese suppliers recently. The latest offers from Japan were coming at $445-450/t c&f for HMS 2 scrap. Taiwanese traders forecast prices for domestic and import material will continue going down in the near future.
Chinese steelmakers keep holding back from purchases as well. However, it is obvious that they will have to resume imports of the material sooner or later. Most traders agree buyer activity of Chinese customers will not revive until June.