Japan: Kanto scrap export prices rebound by $26/t in Jan'23 after two rounds of decline

• A total of 11,000 t of scrap awarded at tender
  
  
• Tight supplies continue to drive up offers
  
  
• Tokyo Steel hikes purchase price by up to JPY 2,000 ($15/t)
  
  

Japan's bellwether Kanto Tetsugen scrap export tender concluded on 12 January, 2022. A total of 11,000 t of scrap was awarded, with the average price at around JPY 50,932/t ($387/t) FAS for H2 scrap, SteelMint learnt from sources.

Bid prices increased by JPY 3,364/t ($26/t) m-o-m compared to bids in December. Prices have rebounded after two consecutive rounds of decline in the last two months. In December, around 13,000 t of scrap was awarded and the average price for H2 scrap stood at JPY 47,568/t ($349/t) FAS.

The first bid of this year started with an upward trend in the Kanto Tetsugen scrap export tender. The first bid was won by Japan's Sangyo Shinko for 6,000 t at JPY 51,030/t FAS, while the second was by JFE Shoji for 5,000 t at JPY 50,815/t FAS.

A hike in the winning bid price was expected after the price hike in December and the market responded by saying that the winning bid was made at the expected level.

On the other hand, Japanese suppliers were reluctant to reduce prices due to the sharp increase in domestic prices. Further, South Korean buyers are to go slow on bookings from Japan due to the drop in domestic prices. Moreover, as scrap import prices have been risen recently to Southeast Asian countries, including China, buyers are also not ready to accept high offers. Japan's domestic scrap purchase prices also increased today following the recent hike in export prices.

FOB prices for exports of Japanese material are higher by around $9-10/t compared to FAS prices. The Kanto tender serves as a benchmark for the Japanese scrap export market.

Buyers looking for other sources

• South Korean mills reduce domestic purchase price: South Korean steel majors Hyundai Steel, Dongkuk, Daehan, YK Steel, and SeAh Besteel have reduced scrap purchase prices by KRW 10,000/t ($8/t), according to SteelDaily.
  
  

Hyundai Steel and Dongkuk Steel cut prices by KRW 10,000/t ($8/t) for their Pohang plant. Similarly, SeAh Besteel, Daehan and YK Steel cut prices by a similar margin for all grades after consecutive hikes. Currently, the scrap supply situation in the South Korean market is smooth and buyers can easily access material. Thus, buyers are showing less interest in booking Japanese material.

• Bangladeshi buyers sourcing US/Australian material: A leading bulk scrap buyer in the south Asia region, Bangladesh, has booked two bulk cargoes from the US and Australia. The cargoes were booked at $455-460/t CFR Chittagong despite the fact that steel producers are hampered by LC opening restrictions. However, indicators for Japanese H2 scrap are at $430/t CFR, which is up by $30/t w-o-w.
  
  

Tokyo Steel raises domestic scrap purchase price: Japan's Tokyo steel increased its scrap purchase price for the first time this month by up to JPY 2,000/t ($15/t) for all its plants, effective from 13 January. The company would pay JPY 51,000/t for H2 scrap for the Tahara, Utsunomiya and Okayama works.

Interestingly, prices have increased after a continuous decline for the last three months since October.

Outlook: Japan's scrap export prices are likely to remain high given the rise in domestic purchase prices. However, prices may edge down in the near term if buyers refuse to accept higher offers.