Japan: Scrap export offers inch up; trade remains gloomy

Japanese scrap export prices inched up this week. Slow demand from overseas buyers due to bid-offer disparity kept trade activities gloomy. However, South Korean mills can reserve a limited quantity.

Scrap suppliers targeted a price of JPY 52,000/t ($401/t), while Korean steelmakers perceived JPY49,000/t ($378/t) as a high price, so the gap between the two is known to be large.

SteelMint's assessment for Japanese H2 scrap export prices stands at JPY 51,000-52,000/t ($/t) FOB, moving up 2,000/t ($/t) w-o-w.

Moreover, Tokyo Steel's Utsunomiya and Okayama factories raised scrap purchase prices, and according to the Japan Iron and Steel Association, average domestic prices also increased in one month.

Additionally, domestic orders for automobiles rose by 9.7% y-o-y to 5,15,000 t in November 2022 for the fourth consecutive month, according to latest data released by the Japan Steel Association. Order volumes remained at a low level compared to the pre-Covid period, due to the supply chain disruption, but has recovered since summer as the supply chain has normalised.

It was expected that scrap prices in Japan would maintain a steady trend for a while, but the upward trend has been dampened, and domestic scrap prices are expected to drop accordingly.

Japanese scrap buyers cautious

• South Korea: One of the major steel producers in South Korea, Daehan Steel, has signed a contract for Japanese H2 scrap at JPY 49,700/t ($383/t) FOB this week. However, the quantity has not been confirmed. This is about JPY 2,000/t ($2000/t), lower than the successful bid price of the Kanto tender result last week.
  
  

Inventories at steelmakers are plentiful at 793,000 t as of the third week of January. Meanwhile, Hyundai steel has announced repair schedules for cold rolling (CR) facilities from 21 January to 4 February, 2023. Changes to production and maintenance schedules may occur to accommodate specific inventory or plant conditions.

• Vietnam: Vietnamese scrap buyers were active in the market before the Tet holidays. The steel producers are heard to have booked a couple of bulk cargoes from the US and Japan. One Japanese-origin 5,000 t deal was concluded this week at JPY 56,350/t ($436/t) CFR Hai Phong. Meanwhile, offers were heard at $445-450/t CFR against bids at $430-435/t, according to sources.
  
  

On the other hand, offers from the US were heard at $440/t CFR Vietnam.

• Bangladesh: In contrast, Bangladesh, South Asia's leading bulk scrap buyer remained silent on bulk scrap bookings due to Letters of Credit (LCs) opening restrictions apart from one million USD. However, a couple of bulk cargoes were booked from the US and Australia at $445-455/t CFR. Furthermore, indications for Japanese-origin H2 material were heard at $460/t CFR Chittagong.
  
  

Outlook: Ahead of the Lunar New Year holidays, the scrap market remained flat, while suppliers are still expecting a price increase after the holidays. The market analysis of both the supply and purchase sides are mixed, and the market is currently showing a steady trend. The fluctuations in the market are likely to depend on the direction in which prices move after the Lunar New Year.