Japan: Weak export demand, declining JPY push down bids in Nov'24 Kanto tender
...
- Export markets cautious as buyers await clarity
- 15,000-t H2 scrap sold to Vietnam buyer
The Japanese Kanto H2 scrap export tender, which concluded today, saw a slight drop in bids, both in JPY and dollar terms. Dollar-denominated bids declined by $3/tonne (t) compared to October's tender, driven by a softening seaborne market.
Approximately 15,000 tonnes (t) of scrap were likely booked by a Vietnam-based mill at JPY 45,180/t ($293/t) FAS, reflecting a drop of JPY 500/t ($3/t) from October's price of JPY 45,680/t ($296/t).
A total of 16 bids were received from 15 trading companies, with no declines. The bid volume was 120,500 t, down 14,700 t from last month.
The depreciation of the Japanese yen by nearly 4% on the month resulted in a m-o-m drop of $12-13/t in the dollar-equivalent prices of Japan's Kanto H2 scrap. In October, the JPY was 147-148 against 1 USD, and now it is 154-155 against 1 USD. JPY 45,680/t, when converted from JPY to USD at the earlier rate, comes to be $308/t, while it is $296/t now, with the exchange rate at 154 JPY versus 1 USD.
This pushed prices below $295/t, compared to $308/t in October 2024. Despite slight declines in actual bid prices, the weaker yen contributed to a larger overall drop in export prices.
This price drop marks the first after a rise in October, which followed three consecutive months of declines. However, this outcome remains higher than initial expectations, which had ranged within JPY 44,200-44,500/t ($287-289/t) FAS.
Sources indicate that FAS levels, currently at $293-294/t, would translate to approximately $303-304/t on a FOB basis. Ocean freight rates are soaring due to vessel shortages, with 15,000 t to Vietnam could cost at $40-45. When factoring in CFR, the price would reach $345-348/t.
The board unanimously decided to accept only the first bid due to shipment delays caused by the typhoon. The shipping deadline for the November contract remains 31 December.
Mr. Minami commented, "The increase in the winning bid price was expected due to the yen's depreciation. However, weak demand in Vietnam, low steel sales, and rising freight rates also supported the decline in bid levels."
BigMint's weekly assessment indicates that Japan's H2 scrap export offers were at JPY 44,500/t FOB Tokyo Bay last week.
Domestic market scenario
In the final week of October, Tokyo Steel maintained stable scrap purchase prices during its latest revision. The H2 scrap prices were set at JPY 41,500/t ($270/t) at Tahara, Okayama, Utsunomiya, and Kyushu; JPY 40,500/t ($264/t) at Kansai; and JPY 40,000/t ($261/t) at Nagoya and Takamatsu.
Traders expect Tokyo Steel to increase collection prices to align with the higher prices in the seaborne market.
In November 2024, the first hike in Japanese H2 scrap prices led to the national average rising by JPY 100/t to JPY 38,100/t. Prices in the Chubu region remained stable at JPY 36,200/t ($236/t). As of 12 Nov'24, electric furnace steel scrap (H2) in Kanto is priced at JPY 40,500-42,000/t, while Gulf Coast prices range from JPY 41,500-43,000/t. The winning bid this time is notably higher than these levels.
Buyer-side updates
Vietnam: Vietnamese buyers are now turning to the Kanto tender for restocking, at the CFR price, including a quality premium. Export negotiations to Vietnam slowed recently due to a vessel shortage.
The market was largely on hold, awaiting clarity following the US election, and slightly bearish expectations dominated due to declining steel and scrap prices in Turkiye and reduced inventory needs at mills.
South Korea: Some South Korean mills placed bids for Japanese HS scrap at JPY 51,000/t ($331/t), shredded at JPY 49,000/t ($318/t), and Shindachi Bara scrap at JPY 50,000/t ($324/t) CFR South Korea.
Taiwan: Despite weak global scrap prices, Taiwan's mini-mills remain cautious, monitoring the impact of the economic stimulus from China. Feng Hsin Steel reduced its scrap purchase prices by TWD 300/t to TWD 9,100/t ($280/t) and rebar prices by TWD 200/t to TWD 18,600/t($573/t). The price cuts aim to stimulate downstream buying amid soft demand, particularly as China's rebar market weakens due to colder weather.
Outlook
Japanese H2 scrap export prices are expected to remain range-bound, with the depreciation of the JPY against the US dollar limiting significant price increases in the near term. The October contract shipment of 15,000 t is scheduled from 20 November to 2 December, with the next Kanto tender set for 11 December.
