The Far Eastern scrap market continues to show resistance to global trends, while the USA – the key scrap market – has already given in to pressure. In Japan, the prices are supported by local steelmakers, which need a foundation to keep prices for finished products high even despite slack demand. The case is that high prices for finished steel make mills’ financial results look better.
Japan''s largest scrap consumer Tokyo Steel is still playing the leading part in price formation in the country. It announced a price cut early in the week but continues to keep prices at the highest possible level.
Starting May 12, purchase prices dropped JPY 500/t ($5/t) at four mills of the company (Okayama, Kyushu, Takamatsu, Tahara). It is remarkable that one of the main Tokyo Steel assets – Utsunomiyа – has left its scrap prices unchanged. After the reduction, the top of the HMS 2 price range stays at JPY 39,500/t ($425/t) delivered, while the lower end has moved down to JPY 36,500/t ($392/t) delivered.
Market players think that such a minor adjustment will have no significant impact on export prices.
The current estimated prices of HMS 2 to foreign buyers lie in the range of JPY 36,800-37,000/t fob ($395-400/t), which, considering currency fluctuations, corresponds to the quotes of a week ago and is by JPY 900-1,200/t ($10-13/t) lower than the latest transaction prices.
In view of weak demand from South Korean and Chinese buyers, the export prices are mostly nominal and reflect the lowest acceptable levels considering the current local prices. The estimated cost of Japanese HMS 2 scrap shipped to South Korea is about JPY 39,000/t c&f ($419/t), unchanged from early May.
Noteworthy, there have been new bookings for scrap in spite of sluggish demand for import material in the Far Eastern region.
For example, US suppliers signed a deal with the leading electric steelmaker in South Korea – Hyundai Steel. In the first days of May, the Korean company booked HMS 1 from the USA at $451/t c&f, down by $20/t from the previous transaction prices between these parties.
Chinese traders succeeded to knock prices for US scrap down considerably. In particular, China’s Shagang purchased a batch of shredded scrap (shipped by three carriers) at $420/t c&f a few days ago, down by $20/t from the cost of similar contracts in late April.
The Far Eastern market is quite likely to succumb to these levels, taking into account the persistent downward trend in the global scrap market and the price roll back in the US domestic market. However, in China, even the current prices for import material exceed domestic prices by $25-30/t, preventing local mills from import purchases.
Most traders forecast that steelmakers will be able to take advantage of the market situation and knock down prices by another $10-15/t till the end of May. At the same time, mills in some regions (specifically, Taiwan) are trying to take initiative in the long product market, testing buyers with price increases. If these increases are a success, scrap prices will get additional support.