Japan: H2 scrap export offers steady w-o-w amid subdued demand, depreciated JPY

The export offers for Japan's H2 scrap remained steady throughout the week, with opposing pressures from both buyers and sellers offsetting each other, thus ensuring market stability. As a result, BigMint's weekly assessment of the Japanese H2 scrap export offers remained flat w-o-w at JPY 52,000/tonne (t) ($345/t) FOB Tokyo Bay. Market sources said, the H2 scrap price has remained unchanged since last week, attributing it to stable offer levels for the time being. Further the domestic market, including Tokyo Steel prices, remained steady. They also also highlighted concerns over poor scrap generation and collection.

According to market participants, the Japanese scrap market is poised to be impacted by fluctuations in the JPY/dollar exchange rate. This can potentially translate into a continued sideways movement in scrap prices due to the JPY's depreciation. Tokyo Steel, a major player in setting Japanese scrap prices, recently indicated that the market has adopted a cautious, wait-and-see attitude. The company announced a halt in price adjustments on 19 February, stating, "Despite ongoing adjustments in the global scrap market, the Japanese market is somewhat insulated by the weaker JPY. Presently, supply and demand remain stable." Furthermore, they projected, "Despite the variable nature of the exchange rate, the cautious wait-and-see trend is expected to persist in the near term."

According to the Japan Iron and Steel Association, the average price of H2 furnaces in three regions for iron scrap in the third week of February increased by JPY 300/t ($2/t) from the previous week, reaching JPY 49,000/t ($325/t). Notably, the Kanto region saw a JPY 1,000/t ($7/t) rise to JPY 50,200/t ($333/t), while the Chubu and Kansai prices held steady at JPY 47,800/t ($317/t) and JPY 49,000/t ($325/t), respectively.

Other market updates

Vietnam: Following the Lunar New Year holidays in Vietnam, purchasing activities remained restrained due to the volatility in Chinese futures, alongside subdued sentiments in the domestic downstream market.

A trader remarked, "Although there were active offers for Japanese scraps to Vietnam, as Taiwan and Korea stayed on the sidelines, there was no significant interest from Vietnamese buyers due to uncertainty in the domestic market resulting from fluctuating Chinese futures."

Export offers for Japanese H2 scrap were evaluated at $395-400/t CFR Vietnam.

Taiwan: In Taiwan, buying interest was robust at the start of the week, resulting in a deal being finalised. However, interest waned as the week progressed due to sluggishness in the domestic finished steel market. A deal involving H1/H2 50:50 scraps from Japan was reportedly concluded at around $378/t CFR. However, these price levels were not sustainable following this agreement.

Recent offers for H1/H2 grade were noted at $380-385/t CFR Taiwan.

South Korea: South Korean buyers persisted in procuring scrap from the domestic market due to the availability of cost-effective materials. Importantly, offers for imported scrap remained elevated compared to domestic scrap prices.

In the domestic market, downstream demand in South Korea remained feeble, largely influenced by lacklustre demand for rebar. A trader based in Korea commented, "Domestic South Korean scrap prices continue to hover below seaborne-grade equivalents."

Outlook

In the near term, Japanese export offers are likely to remain range-bound due to limited demand from importing countries coupled with the volatility in the JPY against the US dollar.