Japan: H2 scrap export offers fall by $3/t w-o-w following currency appreciation

This week, Japanese H2 scrap export offers have decreased further due to the appreciation of the JPY against the US dollar. Despite this, seaborne demand remained sluggish.

Additionally, Tokyo Steel, the largest EAF steel producer, reduced scrap procurement prices twice this week. Effective 26 July, 2024, prices were cut by JPY 500/t ($3/t), setting new prices at Tahara, Utsunomiya, and Okayama plants at JPY 50,500/t ($332/t), JPY 51,500/t ($338/t), and JPY 49,500/t ($325/t) respectively. This decision was influenced by the JPY's rapid recovery, subdued seaborne demand, and expectations of a Fed rate cut, and a less impacted domestic market due to weak demand and sufficient inventory.

In the Kansai region, EAF steel producers have also reduced scrap purchase prices following Tokyo Steel's cut on 24 and 26 July, 2024. Current H2 scrap prices in Osaka are at JPY 50,500-51,500/t ($331-337/t). Summer closures and weak demand have kept market conditions sluggish, with low yard inventories.

BigMint's weekly assessment of Japanese H2 scrap export offers stood at JPY 50,000/t ($323/t) FOB Tokyo Bay, down by JPY 400/t ($3/t) from the previous week's JPY 50,400/t ($326/t) FOB. Currently, 1 USD equals to 154.69 JPY.

Other market updates

Vietnam: Offers for H2 scrap from Japan have climbed, influenced by the appreciation of the JPY, reaching $370/t CFR Vietnam and some suppliers quoting up to $385/t CFR. However, Vietnamese mills have shown limited interest due to weak steel demand, driven by reduced construction activities during the monsoon season.

Meanwhile, Vietnamese steel mills have shown a preference for US-origin bulk HMS (80:20) at around $370-375/t CFR Vietnam. However, suppliers have been unwilling to meet these price expectations.

Vietnamese domestic scrap prices remained stable in the week reflecting steady demand. In northern Vietnam, prices for domestic Type 1 or H2-equivalent 3-6 mm scrap held steady at VND 9,250-9,500/kg ($363-373/t). Similarly, prices for the same grade in the south stayed within a range of VND 8,500-8,750/kg.

South Korea: South Korean mills remained uninterested in seaborne scrap due to accumulating inventories in the domestic market. Domestic scrap prices in Korea held firm, with POSCO and Hyundai Steel raising scrap procurement prices by $7/t last week. Market participants expect scrap demand to improve before the Liberation Day holidays, as major mills tend to restock ahead of the holidays.

H2-equivalent Light A grade scrap stayed within a range of KRW 380,000-390,000/t ($275-282/t) for the week, while Heavy A grade scrap remained steady at KRW 410,000/t.

This week, the combined ferrous scrap inventory of eight major South Korean steel mills reached 815,000 t, marking a slight 1% increase from the previous week's 807,000 t.

Taiwan: Imported scrap demand in Taiwan remained poor due to adverse weather conditions, resulting in a subdued steel market. Offers for Japanese H1/H2 50:50 bulk scraps were at around $358-360/t CFR this week. Notably, on 25 July, a powerful typhoon made landfall in northeastern Taiwan, resulting in at least two deaths and injuring hundreds. Authorities responded by closing financial markets, schools, and offices.

A trader noted, "Buyers were unwilling to book due to more competitive scrap available in containers and the expectation that Japan-origin scrap prices may soften. Demand in alternative export destinations, such as South Korea and Vietnam, is not promising. Additionally, the domestic market in Japan has weakened. Specifically, Tokyo Steel, the largest EAF steel producer in Japan, lowered its prices twice this week."

Outlook

In the near term, H2 scrap export offers are expected to remain under pressure due to the appreciation of the currency against the US dollar. Additionally, demand from key importing markets remains subdued, leading many sellers and traders to focus more on domestic sales.