Chinese Scrap Exports will change Demand-Supply Scenario - Tokyo Steel

Tokyo Steel Manufacturing Company is a Japan-based company principally involved in the manufacture and sale of steel products and steel billets. In the monthly press conference held today (i.e. 22 May'17) at Tokyo Headquarters, Kiyoshi Imamura, Managing Director of Tokyo Steel Manufacturing said "supply-demand structure in Asia will change as China's scrap exports continue".

This is as an independent idea about the cause of drop in scrap prices.

"If the production of steel in China will be stopped by 30 Jun as planned in the future, scraps coming out of places that have a large production capacity of 80 MnT pa will not be consumed in China. Although there seemed to be concern materials to be put out, there is a possibility that the possibility is low because 40% of the export duty is applied, but if it comes out, the supply and demand structure in Asia may change, he added.

Until now, the sources of scrap in Asia are primarily USA and Japan. When China joins there, we can see the change again. This sharp fall may have been a sign of the structural change, he further added.

Currently on the basis of current H2 quotation price, it is Yen 23,500/MT in Utsunomiya and Yen 25,000/MT in Tahara. In contrast to this, from US to Turkey it is dollar denominated but it has changed to USD 270/MT for Taiwan, USD 240/MT scrap from Russia to South Korea have been running at USD 260/MT.

Stricter environmental regulations of Chinese government to boost scrap exports

With Chinese government laying stricter regulations on electric arc furnace steelmakers, indicates the possibility of increase in scrap exports from China in the coming time. Steel mills in China traditionally consume domestic scrap, but the government demanding a halt to the operation of induction furnaces, small electric furnaces that produce low-quality steel and which Beijing sees as contributing to air pollution.

The Chinese government's directive to eliminate scrap-fed induction melting furnaces in the country by June 30, led to a huge turnaround. According to industry estimates, China's induction furnaces produced around 30-50 MnT steel last year, and capacity totaling 80-120 MnT of finished steel output will go.

Based on the output range last year, 33-55 MnT of scrap would need to find a home.

Increase in Chinese scrap exports to depress Scrap prices in Asia

Chinese scrap availability for exports, despite a 40% export duty being imposed, is expected to depress scrap prices in Asia.

There were news about Japanese steel mills being offered Chinese scrap however buyers remained cautious before booking Chinese scrap cargoes over quality and performance concerns.