Japan: Kanto's Mar'24 tender sees sharp $20/t drop amid downtrend in global scrap prices

Around 5,000 tonnes (t) of H2 scrap were secured in the recent Japanese Kanto export tender, at JPY 50,100/t ($340/t) on a FAS basis, marking a significant decline of JPY 2,987/t ($20/t) compared to the previous month. The FOB price is estimated to be around JPY 52,000-52,500/t ($352-356/t), equivalent to INR 29,445/t (FOB). The shipment is expected to be booked for Vietnam.

Notably, Japan's FAS prices are lower by JPY 300/t compared to the last recorded FOB prices. BigMint's weekly assessment indicates that Japan's H2 scrap export offer was at JPY 50,400/t ($342/t) FOB Tokyo Bay, marking a decline of JPY 1,700/t ($12/t) compared to the previous week..

As per market insiders, the winning bid price stayed in the JPY 50,000/t range for 7 consecutive months, hitting its lowest level in 7 months at JPY 49,799/t. All 15 companies participated, with 16 bids totaling 90,900 t, the first time below 100,000 t in four months. Stagnant demand from Asian countries, coupled with a significant drop in US scrap export prices from Turkiye, influenced the bid price. The exchange rate of JPY 146 against USD also played a role. The shipment is scheduled until 30 April likely to connect for Southeast Asian countries. However, the next bidding is expected to be on 10 April 2024.

Additionally, Tokyo Steel, a leading Japanese mill, announced a price reduction of JPY 1,000/t ($7/t) for domestic ferrous scrap, effective from March 13, 2024. This adjustment, marking the second price drop in March, brings the new price for H2 scrap at the Tahara, Okayama, and Utsunomiya plants to approximately JPY 51,500/t ($349/t).

Buyer-side updates:

Vietnam: Vietnam's imported ferrous scrap prices continued to decline. US-origin offers were at $395/t CFR Vietnam, prompting reluctance from importers to bid above $375/t CFR. Japanese H2 scrap prices also dropped to $398/t CFR Vietnam. Vietnamese mills preferred the comparatively cheaper local scrap, which dipped due to subdued market activity. Japanese scrap prices saw a slight decline, with limited seaborne interest from Vietnam and South Korea.

South Korea: South Korean steel mills saw a 2.5% decrease in iron scrap inventory in early March, marking the first decline in seven weeks. The drop was sharper in the southern region, down by 4.5%. Despite stable levels at some plants, others, like Hyundai Steel's Pohang plant, saw significant decreases. This decline is attributed to high rebar inventory levels and subdued demand.

Rebar manufacturers held around 387,000 tonnes of inventory, close to 400,000 tonnes when considering processing plants. Despite lower new orders and reduced demand, March's production plan for rebar steel is down to 637,000 tonnes from the yearly average of 792,000 tonnes. Imports sharply decreased, with Hyundai Steel notably seeing a drop from 49,221 tonnes to 22,158 tonnes. Concerns arise about supply and demand dynamics despite expected consumption increases in March.

Taiwan: Taiwanese mills showed limited interest and secured a deal, but as global markets continued to decline and domestic steel demand remained weak, interest dwindled. Offers for Japanese H1/H2 50:50 grade were at $370-375/t CFR Taiwan, with a deal struck at $368/t, though the exact quantity wasn't confirmed.

Feng Hsin Iron and Steel, a Taiwanese steelmaker, reduced its bid price for domestic scrap by TWD 300/t ($9.53/t) to TWD 11,300/t ($359/t) and downstream rebar prices by TWD 300/t to TWD 18,800/t ($598/t) due to weak demand and market challenges. Despite these adjustments, concerns about margins persist due to sluggish steel sales.

Outlook: Japanese scrap prices are expected to remain under pressure as key buyers such as South Korea, Vietnam, and Bangladesh continue to show little interest. This lack of interest stems from their subdued domestic steel markets and the availability of local scrap at competitive prices.