Japan: Kanto Monthly Scrap Export Tender for October Fetches Bid Lower than Expectations

No deal was concluded as even the highest export bid prices were lower than the expected bids amid high domestic prices.

As per recent updates received from sources, 'Kanto Tetsugen'- monthly ferrous scrap export tender for Oct'18 was concluded today (on 11th Oct) in Kanto region in Japan. The average bids for Oct'18 were heard at JPY 34,900/MT (USD 311), FAS. However, no material was booked as no deal concluded amid sharp price gap between domestic & export prices.

On monthly premises, bids have edged up by JPY 414/MT (USD 4) M-o-M as against the average bids fetched at JPY 34,486/MT (USD 307), FAS in Sept'18 tender, in which total 15,510 MT of Japanese H2 scrap was awarded through three winning bids placed.

Monthly around 20,000 MT H2 get auctioned through this tender. It is also to be noted that FoB prices for the same are higher by around USD 9-10/MT than FAS (free alongside ship) prices.

What could be its impact - According to reports, the bid placed in Oct'18 tender remained considerably lower than prices prevailing in domestic market indicating clear sense of the market. Tokyo steel's market H2 scrap purchase price is of JPY 37,500/MT at Utsunomiya work located in the same Kanto region. Also, during ongoing autumn season finish steel demand in Japan likely to remain firm amid strong construction activities.

Japanese scrap prices keep climbing high but the resistance from major importers in South Korea and South East Asian buyers continues on sharp disparity between global price levels and Japanese levels.

In Kanto region, H2 scrap prices are hovering in the range of JPY 36,000-37,000/MT while in the Gulf region H2 prices remain around JPY 35,000-35,500/MT. Many of the overseas importers remain holding scrap purchases and waiting for the correction to favorable levels with expectation below by JPY 1500-2500/MT than current prices.

What happened in Japan's domestic and export scrap market in last 1 month?

Japan's leading EAF steel mill Tokyo witnessed sharply increased prices at all plants witnessing 7 successive price hikes in Sept amid increased production hours. Prices climbed up by JPY 1500-3000/MT (USD 13-27) M-o-M in Sept'18 hitting two years' high at Okayama and Kyushu. Currently, Tokyo Steel fetches H2 scrap at JPY 39,000/MT for Kyushu and JPY 38,000/MT at Tahara works as per last update on 03th Oct.

South Korean Hyundai Steel continued booking USA origin bulk scrap cargoes skipping bidding for Japanese scrap. The steelmaker shifted its method of purchasing from bidding to negotiating individually with sellers' in the Japan's spot market especially for high grade Japanese scrap. For H2 it seems not willing to pay more than JPY 35,500/MT, CFR as it witnessed sharp rise in inventories available in hand amid cutting domestic scrap prices and purchases significantly.

In last one month's time, JPY depreciated from 111.4 on 11th Sept'18 hitting record low 114.4 on 4th Oct'18 against USD, and again rebounded back to 112.2 levels today.