Japan's Kanto scrap export tender bids for Oct'24 rebound post 2-month decline amid JPY depreciation

The Japanese Kanto H2 scrap export tender, which concluded today, saw a significant rebound in bid prices, both in JPY and USD terms. Dollar-denominated bids increased by $20/t compared to September's tender. This marks the first upward shift in export bids in three months.

In September 2024, the auction price hit a two-year low, but the sharp rebound in October surprised the market, which had anticipated prices to stay within the JPY 42,000-43,000/t FAS range.

The recent depreciation of the JPY, dropping about JPY 6 to JPY 149 per dollar, played a vital role in driving the higher bids. Another key factor was the pause in China's low-priced billet exports, which had been pushing market prices down.

Chairman Mr. Koji Minami commented on the results, stating, "The winning bid was as expected, but market conditions shifted this week. The JPY's depreciation and a temporary halt in China's billet and steel exports were key factors."

As per market reports the winning bid, destined for Vietnam, also indicates a temporary slowdown in China's aggressive export of cheap billets and steel products, providing some relief to global markets. While the winning bid wasn't remarkably high, weather-related shipping delays restricted it to the initial round.

Approximately 15,000 tonnes (t) of scrap were likely to be booked by a Vietnam-based mill at JPY 45,680/t ($308/t) FAS, reflecting a rise of JPY 2,960/t ($20/t) from September's price of JPY 42,720/t ($288/t).

As per industry reports, the tender saw a total of 18 bids from 15 trading companies, with no declines. The total bid volume reached 135,200 t, the highest since October 2021. The contracted 15,000 t will be shipped between the 2nd to 3rd week of October with another 15,000 t scheduled for the last week of October to the first week of November.

Notably, Japan's last recorded FOB prices are lower by JPY 4,680/t compared to current FAS prices, which are expected to rebound as well.

BigMint's weekly assessment indicates that Japan's H2 scrap export offer was at JPY 41,000/t FOB Tokyo Bay last week.

Furthermore, this rise has affected Japan's domestic ferrous scrap prices, including Tokyo Steel's scrap procurement price.

Tokyo Steel scrap purchase price trend

Japan's Tokyo Steel has announced its first increase in domestic scrap procurement prices, effective from 10 October 2024, following several cuts last month. The company will raise prices by up to JPY 3,000/t ($22/t) across all its plants. The effective H2 prices are as follows:

• Tahara, Okayama, Utsunomiya plants: JPY 41,500/t ($279/t)
  
  
• Kansai, Kyushu plants: JPY 40,500/t ($266/t)
  
  
• Nagoya, Takamatsu plants: JPY 40,000/t ($272/t)
  
  

As per market reports, the winning bid significantly outpaced current domestic prices, where Kanto manufacturers buy at JPY 37,500-39,000/t, and Gulf region prices sit at JPY 38,000-39,500/t.

Buyer-side updates:

Suppliers in Japan increased their export prices due to rising Chinese billet prices and optimistic market sentiment following recent stimulus measures in China. While buyers are taking a cautious approach and monitoring the market, Japanese suppliers are not hurrying to make offers for November shipments, as they anticipate stronger demand with China's return from the holidays.

Vietnam: The demand for Japanese scrap in Vietnam remained subdued, with H2 offers climbing to $340-345/t CFR Vietnam, though no major deals were finalised last week. While market participants expect a potential uptick in restocking activity towards the year-end, many buyers remain cautious, observing market movements from the sidelines.

What stands out is Vietnam's increased interest in Japanese scrap imports, alongside Bangladesh, which has been a major buyer. This suggests a growing global preference for Japanese steel scrap, driven by the sharp rise in charter and billet prices following China's economic stimulus package announcement.

South Korea: Demand for Japanese scrap in South Korea was dull, with H2 offer activity remaining low due to quiet market conditions. Despite stable prices of H2-equivalent Light A grade scrap at KRW 400,000-410,000/t ($304-310/t) and Heavy A grade at KRW 430,000-435,000/t, a public holiday on 9 October contributed to a slowdown in trading activity.

Taiwan: In Taiwan, Japan-origin H2 scrap prices remain range-bound at $335-340/t CFR in the mid-week with US-origin HMS(80:20) bulk prices dropping by $10/t to $310/t. Taiwanese mini-mills are holding off on adjusting rebar and local scrap prices, opting to wait and assess market conditions during the peak steel consumption season. Market participants noted that Taiwanese mills are increasingly favouring competitively priced containerised scrap from the US.

Outlook: The recent surge in Japanese ferrous scrap export prices and FAS levels, following a prolonged decline, has raised concerns over the optimal timing for procurement, particularly amid waning demand from key buyers like Bangladesh and South Korea. This unexpected rebound has shifted market sentiment, suggesting a renewed strength in export demand. The next tender is scheduled for 12 November.