Caution prevails in Japanese scrap market as buyers await Kanto tender

Japanese H2 scrap export prices remained relatively stable with a slight decrease w-o-w. However, both the domestic and export markets experienced lack of activity. Buyers, anticipating the upcoming Kanto tender, scheduled for July 11, 2023, displayed a sense of caution by refraining from making significant purchases.

SteelMint's assessment indicates that Japanese H2 scrap is priced at JPY 49,500/t ($345/t) FOB, dropping by JPY 500/t ($3/t) w-o-w amid limited trades.

According to SteelMint data, Japan's ferrous scrap export volume increased nominally in the previous month. Moreover, the domestic market showed signs of strength in June, leading market participants to anticipate strong export volumes in both June and July.

Other market updates

South Korea

The South Korean domestic scrap market experienced price declines due to reduced demand caused by the market downturn and scheduled maintenance at mills. This situation has led to a gradual build-up of scrap inventory, resulting in an inevitable downtrend as supply surpasses current demand.

Additionally, steel scrap inventories exceeded 900,000 t, reflecting a 5.1% increase of 44,000 t from the previous week. The decline in demand, influenced by market conditions and seasonal factors, has contributed to the accumulation of steel scrap inventories.

South Korean buyers have displayed a lack of interest in purchasing deep-sea cargoes. A South Korean mill source informed, they have no plans to procure deep-sea cargo currently.

Vietnam

Imported deep-sea bulk scrap prices in Vietnam remained unchanged this week. Mills in Vietnam are cautious about engaging in the seaborne deep-sea bulk scrap market due to narrow profit margins and sluggish steel sales, creating an uncertain market outlook. Furthermore, the unstable electricity supply in North Vietnam adds to the uncertainty, affecting the planning and operations of steel mills in the region.

HMS(80:20) scrap had indicative bids of $405-410/t CFR, deemed low by sellers. H2 scrap indicatives were at $390-400/t. Vietnamese buyers seek significantly lower prices, creating a $20-$25/t gap between offers and bids.

The Vietnamese ferrous scrap market is currently grappling with multiple challenges. These include narrow profit margins, sluggish steel sales, a significant gap between offered and bid prices, and trade restrictions in the form of extended tariffs imposed by the European Union (EU).

Outlook

In the near term, weak overseas demand is expected to lead to a further decline in Japanese scrap export prices, potentially impacting market dynamics. Furthermore, certain South Korean mills are likely to decrease production in July-August due to reduced demand in the domestic market. The Vietnamese market is also expected to remain sluggish during the coming weeks.