Japan: Monthly Scrap Export Tender for June Fetches Bid Down by USD 2/MT

Japan's monthly ferrous scrap export tender 'Kanto Tetsugen' for June'18 has recorded average bids edge down by USD 2/MT M-o-M, following which increased domestic scrap prices in Japan are likely to come under pressure.

As per recent updates received from sources, 'Kanto Tetsugen'- monthly ferrous scrap export tender for June'18 concluded today (on 13th June) in the Kanto region in Japan. The average bids for June'18 recorded at JPY 34,000/MT (USD 307), FAS. On monthly premises, bids have edged down by JPY 245/MT (USD 2) M-o-M as against the average bids fetched at JPY 34,245/MT (USD 309) in May'18. In the June'18 auction, 10,000 MT of Japanese H2 scrap was awarded through a winning bid placed.

In the May'18 auction, total 16,000 MT of Japanese H2 scrap was awarded through two winning bids placed and H1 bidder fetched 6,000 MT at JPY 34,470/MT (USD 312), FAS. Monthly around 20,000 MT H2 get auctioned through this tender, however, export volumes fell this month amid low demand for low-grade scrap from importers.

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. Bids recorded in Kanto Tetsugen for June'18 pulled Japan's domestic H2 scrap price assessment down in the range of JPY 34,500-35,500/MT (USD 312-321), FoB at Kanto region.

What could be the impact of this?
It was the matter of high interest among participants to analyse the levels to which bids for Japanese monthly Kanto export tender get fetched amid mismatch between Japanese sellers' price expectations and importers bids. Following a drop in the bids fetched in Kanto tender, Japanese domestic scrap prices are likely to turn down now.

What happened in Japanese scrap market in the last month?

Japan's leading EAF steel mill Tokyo increased bids for H2 delivered to its Utsunomiya work based in Kanto region by JPY 4000/MT (USD 36). Through five price hikes witnessed in last one month, Tokyo raised H2 bids to JPY 37,000/MT levels. However, the price gap between Utsunomiya plant and Western Okayama plant widened by JPY 5500/MT (USD 50) for the same grade H2 in Japan.

Expectations from Japanese sellers had increased to JPY 36,000-36,500/MT, FoB for H2 exports in Kanto region following increasing domestic prices in Japan. However, importers remained expecting that Japanese domestic scrap prices would have reached a short-term peak.

Also, the demand for Japanese scrap from South Korean steelmakers fell sharply amid significant rebar production cuts and considerable scrap inventories in last one months' time. Leading steelmakers like Hyundai and Dongkuk steel kept purchasing high-grade Japanese scrap over H2.

Hyundai Steel bids for Japanese H2 was at around JPY 34,000/MT (USD 307), FoB Japan in the beginning of this month. However, in the latest bid, the steelmaker kept bids stable for high-grade Japanese scrap abandoning the bids for the lower grade like H2 and H 1/2 owing to considerable inventories in hand.

In last one month's time, USD/JPY exchange rate kept fluctuating in the range of 109 to 110.5. In last one weeks' time, JPY depreciated by around 1%. JPY stood at 110.6 today which was trading at 109.4 a week ago against USD.