Japan: H2 scrap export offer witnesses sharp rise post-recent Kanto tender

Japanese H2 scrap export offers saw a sharp hike this week, driven by a significant rise in the monthly Kanto scrap export tender, which closed nearly JPY 3,000/tonne (t) higher than September's. A 15,000-t cargo was reportedly booked by a Vietnamese mill at JPY 45,680/t ($308/t) FAS, reflecting an increase of JPY 2,960/t m-o-m.

This bid increase is attributed to JPY depreciation and a pause in cheaper billet exports from China.

Despite the price surge, market participants remain uncertain about its sustainability, as Chinese steel futures and spot prices stayed low without new stimulus support, fuelling a cautious approach among buyers and sellers.

A Vietnam-based mill source commented, "The tender price likely jumped up because many were previously expecting the Chinese market to rise after the Golden Week holidays. However, market sentiment went downwards after the holidays due to a lack of concrete stimulus policies being announced."

Following increase in the Kanto tender, a major Japanese EAF-based steel producer, Tokyo Steel, has announced its first hike in domestic scrap procurement prices, effective from 10 October 2024, following several cuts last month. The company has raised prices by up to JPY 3,000/t ($22/t) across all its plants. The effective H2 prices are as follows:

• Tahara, Okayama, Utsunomiya plants: JPY 41,500/t ($279/t)
  
  
• Kansai, Kyushu plants: JPY 40,500/t ($266/t)
  
  
• Nagoya, Takamatsu plants: JPY 40,000/t ($272/t)
  
  

BigMint's weekly assessment of Japanese H2 scrap export offer stood at JPY 45,600/t ($306/t) FOB Tokyo Bay, up by JPY 4,600/t ($31/t) from JPY 41,000/t ($276/t) w-o-w.

Other market updates

Vietnam: Vietnam's imported scrap market showed rising prices following Japan's higher October Kanto H2 scrap tender results. Offers for Japanese H2 scrap to Vietnam were heard at $350-360/t CFR, up $20-$25/t from the previous week. However, Vietnamese buyers expressed hesitation, with bids at around $340-$345/t, finding the elevated $350-360/t level challenging to accept. The sudden increase in offers spurred cautious market sentiment as buyers closely monitored price movements for greater clarity.

Domestically, Vietnam's scrap prices remained stable, with 3-6 mm scrap in northern regions priced at VND 9,100-9,700/t ($367-391/t), while southern region prices held at VND 8,500/t ($342/t). Downstream, rebar and billet prices stayed steady, though a slight uptick in steel bar prices was noted following a mill's price adjustment on 7 October.

South Korea: South Korea's imported scrap market was relatively quiet this week, with very few Japanese H2 scrap offers, following the steep hike in the Kanto scrap tender. South Korean mills showed limited interest in the high-priced offers, as shredded scrap was bid at around JPY 47,000/t and HMS scrap at JPY 48,000/t CFR, with further price clarity being awaited.

Domestically, scrap prices for Light A and Heavy A grades held steady at around KRW 410,000/t ($299-$310/t) and KRW 430,000/t, respectively. However, South Korean mills recently reduced rebar production, lowering non-operation ratios to 28.2% due to increased inventory levels and weaker demand.

Market participants anticipated potential downward pressure on scrap prices amid sufficient supply and price cuts from some local suppliers.

Taiwan: Taiwan's imported scrap market remained stable, with Japanese H2 inching up to $315-320/t CFR Taiwan. Buyers monitored these higher Japanese offers cautiously, with limited purchasing activity observed.

Feng Hsin Steel, Taiwan's largest rebar producer, raised prices by TWD 200/t ($6/t) but kept local scrap procurement prices unchanged at TWD 9,100/t due to sufficient local supply and steady US-sourced HMS (80:20) scrap priced at $310/t CFR Taiwan. Positive rebar price trends on the Chinese mainland have boosted market sentiments in Taiwan, though local mills remain cautious amid recent Chinese production increases and inventory build-ups.

Outlook

Japanese scrap export offers are likely to stay firm, supported by the October Kanto tender price increase and rising domestic demand. However, with Southeast Asian buyers like Vietnam and Taiwan hesitant due to current high offer levels, Japanese suppliers may encounter resistance in the market. This cautious buyer sentiment, paired with mixed steel price trends in China, suggests potential volatility. While Japanese suppliers watch for further market clarity, any adjustments in export offers will likely hinge on regional demand stability and developments in China's steel market dynamics.