Japanese H2 scrap export offers drop for 7th consecutive week amid weak demand, economic pressures

Japanese H2 scrap export offers have continued to decline for the seventh consecutive week. In August alone, export offers dropped by JPY 5,500/tonne ($38/t).

According to BigMint's latest assessment, Japanese H2 scrap export offers are now at JPY 44,500/t ($307/t) FOB Tokyo Bay, a decrease of JPY 2,000/t ($14/t) from the previous week's price of JPY 46,500/t ($320/t) FOB.

Several factors have contributed to this ongoing decline. The initial strengthening of the Japanese yen (JPY) against the US dollar made Japanese scrap more expensive for international buyers. As offers decreased in JPY terms, they increased in dollar terms, leading to cautious buying, particularly in markets like Vietnam and South Korea, where weak domestic demand and higher costs have reduced interest.

Additionally, the global steel market downturn, marked by sluggish downstream demand and increased competition from cheaper alternatives like billets, has further reduced the attractiveness of Japanese scrap. Importing countries, especially Vietnam, have shifted towards more competitively priced scrap from South Korea, Hong Kong, and Russia.

Furthermore, the mid-August summer holiday season in Japan led to reduced market activity, with both buyers and sellers adopting a wait-and-see stance. This cautious sentiment, combined with Tokyo Steel's decision to lower domestic scrap procurement prices, has added additional pressure, causing Japanese H2 scrap export prices to decline steadily week after week.

Tokyo Steel has recently announced a further reduction in its domestic scrap procurement prices, effective 30 August, 2024. The company has decreased prices by JPY 500/t ($3/t) at its Utsunomiya plant, bringing them down to JPY 45,500/t ($313/t). Meanwhile, prices at the Tahara and Okayama plants have remained stable at JPY 46,000/t ($317/t).

Other market updates

Vietnam: In Vietnam, demand for Japanese scrap remained weak as local buyers favoured domestically sourced scrap, priced around $340/t. As a result, offers for Japanese H2 scrap dropped to $356-360/t CFR Vietnam, down from $360-370/t the previous week. Vietnamese mills observed that demand for both flat and long steel had not yet picked up, further contributing to the hesitation to purchase more expensive Japanese scrap.

South Korea: South Korean demand for Japanese scrap remained subdued. Domestic scrap prices were stable, with H2-equivalent Light A grade scrap at KRW 395,000/t ($297/t) and Heavy A grade at KRW 425,000/t. However, the broader market was impacted by weak trends driven by low Chinese billet prices and a lack of incentives from mills. POSCO, a major South Korean mill, re-entered the seaborne market to bid for shredded scrap at JPY 51,000/t CFR South Korea, down from their previous bid of JPY 57,500/t. Despite this, the market remained quiet, with limited engagement from South Korean and other Asian buyers.

Taiwan: In Taiwan, mills showed minimal interest in Japanese scrap, preferring US-origin HMS 80:20 scrap instead. Offers for Japanese H1/H2 50:50 scrap fell to $340/t CFR Taiwan, down from $352/t the previous week. Taiwanese mills, such as Feng Hsin Steel, opted to keep their rebar and local scrap prices steady, maintaining rebar list prices at TWD 18,500/t ($580/t) EXW and local HMS 80:20 scrap at TWD 9,600/t. This decision to hold prices was influenced by the overall decline in global scrap prices delivered to Taiwan, with Japanese H2 scrap dropping to $345/t CFR Taiwan. Despite this downtrend, a rebound in finished steel prices in China helped support Taiwan's rebar pricing strategy.

Outlook

The near-term outlook for Japanese H2 scrap export offers remains bearish, driven by persistently weak demand in key markets such as Vietnam, South Korea, and Taiwan. Domestic price cuts and subdued global steel market activity, especially from China, are adding further downward pressure. Unless there is a significant change in global economic conditions or a resurgence in buyer interest, Japanese H2 scrap prices are expected to continue their downtrend.