Japan: Kanto scrap export tender bids fall in August, further drop less likely

A total of 20,000 t of scrap was awarded and the average price for H2 material stood at around JPY 42,061/t ($312/t) FAS in Japan's monthly Kanto scrap export tender concluded today for August 2022, SteelMint learnt from sources. Prices have fallen by JPY 2,493/t ($19/t) levels from JPY 44,554/t ($330/t) fetched in July. Notably, prices have fallen to a 16-month low on subdued market sentiments but may not see further drops from here, SteelMint understands.

The highest bid was awarded at JPY 42,071/t ($312/t) for 15,000 t, followed by the second winning bid of around 5,000 t at JPY 40,030/t ($297/t) for Japanese H2 material. Sources conveyed that the highest bid's materials have been booked by a major Bangladesh-based mill.

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

Market overview

• One bulk shipment to Bangladesh: The first cargo will be shipped to Bangladesh, market participants revealed, as buyers are showing consistent interest in buying bulk material from Japan since July. A total of 15,000 t of H2 material has been booked at JPY 42,071/t ($312/t) FAS basis.
  
  
• Vietnam buyers may return for Japanese material: In today's tender result, Vietnam-based buyers may have booked a bulk cargo, considering the sudden fall in prices. A few bookings for Japanese scrap were heard concluded previously. Amid increased domestic prices, buyers' interest towards imported material may resume. Indicative offers for Japanese bulk H2 scrap were heard at $345-350/t CFR Vietnam earlier this week.
  
  
• South Korean mill bids for Japanese scrap: Dongkuk Steel bid for Japanese material and was heard to have booked H2 material at a price range of JPY 39,000-40,000/t ($289-296/t) FOB. However, an official stated to SteelDaily that, "this contract is not a signal that Japanese imports will resume in earnest". In contrast, South Korean steel majors will cut domestic scrap purchase prices, as per SteelDaily. POSCO is expected to cut prices by KRW 15,000/t ($11/t) for saengcheol and weight A grades for Pohang and Gwangyang. Other grades will be lowered by KRW 10,000/t ($8/t).
  
  

Hyundai, Daehan and YK Steel will likely cut prices by KRW 10,000/t ($8/t) and SeAH Changwon Steel, by KRW 20,000/t ($15/t), for all grades.

Tokyo Steel scrap purchase prices unchanged: Following the scrap export offers, Tokyo Steel, Japan's largest EAF steelmaker, had continued to lower its scrap purchase prices for the last three months. But from last week the company held firm its purchase prices. Currently, bid prices for H2 scrap were at JPY 42,000/t ($311/t) delivered to Tahara, and at JPY 41,000 ($303/t), delivered to Utsunomiya works in the Kanto region via land route. Interestingly, prices have fallen to an 18-month low for H2 grade at the Utsunomiya works.

Outlook
Japanese scrap export offers are likely to drop further on the back of lower bids received in the Kanto tender. SteelMint's assessment for Japanese H2 scrap export prices last week stood at JPY 36,000-37,000/t FOB. On 21 July, Hyundai Steel cut bids for Japanese scrap, and bids for H2 were set at JPY 40,500/t.

Thus, the bids fetched in today's Kanto tender are relatively higher than export prices, which shows that there is less room for a price cut in Japanese scrap.

Moreover, the market would get clear directions after the Obon holidays from 10-16 August.