Japanese H2 scrap export offers further soften w-o-w on muted demand from key markets

• Tokyo Steel slashes scrap procurement prices for 9th time in Sep'24
  
  
• Taiwanese FHS keeps local scrap buying offers stable despite global price decline
  
  

This week, Japanese H2 scrap export offers continued to decline, driven by weak buying interest and increased competition from other nations.

Additionally, Japanese suppliers were reluctant to make offers, expecting a potential price rebound due to optimism in the Chinese market following the announcement of economic stimulus measures. As a result, only a limited number of suppliers were actively offering in the seaborne market.

BigMint's latest assessment pegs Japanese H2 scrap export offers at JPY 40,300/tonne (t) ($282/t) FOB Tokyo Bay, reflecting a drop of JPY 200/t ($1/t) compared to the previous week's price of JPY 40,500/t ($283/t) FOB.

Japan's leading EAF steel producer, Tokyo Steel, has announced its ninth consecutive reduction in domestic scrap procurement prices, with a cut of up to JPY 1,000/t ($7/t) across all plants, effective 27 September. This brings the total price drop for September to JPY 5,500-6,500/t ($38-45/t). H2 scrap currently stands at JPY 38,500-40,500/t ($) across Tokyo Steel's plants.

Other market updates

Vietnam witnesses muted demand for imported scrap: In Vietnam, demand for Japanese scrap remained relatively weak, despite a decline in offers. H2 scrap offers to Vietnam softened by $10/t, landing in the $320-$325/t CFR range, but bids from Vietnamese buyers were still below $320/t, signalling that local buyers were cautious and hesitant to commit at higher prices. The lack of concluded deals further reflected muted demand for imported scrap, as market participants remained on the sidelines, watching price movements closely amid uncertainty.

Vietnamese domestic scrap, however, remained stable, with Type 1 or H2-equivalent 3-6 mm scrap in northern Vietnam priced at VND 8,900-9,500/t ($362-$386/t) and southern Vietnam seeing offers of around VND 8,300/t. Tight domestic scrap supply, exacerbated by Typhoon Yagi and recent flooding, contributed to this price stability.

Additionally, market sources indicated that stricter taxation investigations could push domestic scrap prices higher in the near future, as suppliers are unable to issue inflated tax levels, adding pressure to base prices.

Falling prices fail to revive demand in South Korea: In South Korea, demand for Japanese scrap remained weak, despite falling Japanese ferrous scrap prices. Although Japanese H2 offers became cheaper, buyers found no cost advantage in importing, with market participants noting that further price drops would be necessary to make imports viable. Even though Japanese H2 prices were now lower than South Korea's domestic Light A scrap for the first time in 11 months, South Korean mills continued to prioritise local scrap over imports.

Domestic scrap prices in South Korea remained steady after the Chuseok holiday. Light A grade scrap was priced at KRW 395,000/t ($297/t), while Heavy A grade held at KRW 425,000/t, showing no significant changes.

Major South Korean steelmakers increased their stock levels, suggesting stable demand. Additionally, a steelmaker raised its rebar prices by KRW 30,000/t for early October to mitigate losses, reflecting possible cost pressures in the domestic market.

Taiwanese buyers adopt wait-and-watch approach: In Taiwan, demand for Japanese scrap remained subdued, with H1/H2 50:50 offers dropping slightly to $318/t CFR Taiwan. Despite these lower offers, no deals were concluded as buyers adopted a wait-and-watch approach amid quiet market activity and high inventory levels.

Meanwhile, Feng Hsin Steel (FHS), Taiwan's largest rebar producer, kept its local scrap procurement offers unchanged at TWD 9,300/t, despite global scrap price declines. Domestic demand for scrap held steady, supported by better sales of finished steel products and expectations of stronger steel consumption in the fourth quarter, the traditional peak season in Taiwan.

Outlook

In the near term, Japanese H2 scrap export prices may stabilise as suppliers anticipate a rebound amid positive sentiment from China's economic stimulus measures. While current offers are declining, the reluctance of Japanese sellers to offer aggressively suggests a potential price floor. However, weak demand across key markets, including Taiwan and South Korea, may continue to temper prices, with buyers remaining cautious amid high inventory levels. In Taiwan, steady domestic demand may support local scrap prices, but the market will likely remain vigilant as participants await further price movements.