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Japan's H2 scrap prices continue to decline amid weak global demand

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Melting Scrap

BigMint Bureau

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6 Sep 2024, 18:53 IST

Japan's H2 scrap prices continue to decline amid weak global demand

Japan's H2 scrap export offers have experienced another drop of around JPY 1,000/tonne (t) ($7/t) this week, marking the eighth consecutive weekly decline. These price levels were last observed in December 2022.

The ongoing decrease in offers is primarily due to limited buying interest in global markets and competitive pricing from other exporting nations.

According to BigMint's latest assessment, Japanese H2 scrap export offers are now at JPY 43,500/t ($304/t) FOB Tokyo Bay, down by JPY 1,000/t ($7/t) from the previous week's price of JPY 44,500/t ($311/t) FOB.

Additionally, Japanese domestic scrap prices also declined this week following a series of price cuts by Tokyo Steel, one of Japan's major electric arc furnace (EAF) steel producers. On 5 September, Tokyo Steel announced a JPY 500/t price reduction across all its EAF plants and collection yards, effective from 6 September, citing weak scrap demand. After the revision, prices at the Tahara, Okayama, Kansai, and Kyushu plants stood at JPY 45,000/t ($313/t), at Takamatsu and Utsunomiya at JPY 44,000/t ($306/t), and at Nagoya at JPY 43,500/t ($303/t).

As a result, domestic free alongside ship (FAS) collection prices for H2 grade scrap also dropped w-o-w, declining to JPY 41,500-42,300/t ($290-296/t) from the previous range of JPY 43,500-44,000/t ($304-308/t), following Tokyo Steel's price cuts.

Other market updates

Vietnam: Japanese H2 scrap demand in Vietnam remained subdued, with offers declining to $350-$355/t CFR from $356-$360/t the previous week. Limited bidding activity was observed as Vietnamese mills and traders cautiously resumed operations after the National Day holidays. Rising freight rates from Japan exerted additional pressure on prices. Buyers remained hesitant, waiting for cheaper inventory material to clear before making new purchases. Prices are expected to continue falling until mid-September, with potential recovery depending on trends in Chinese steel billet.

In Vietnam, domestic scrap prices held steady this week. Type 1 or H2-equivalent 3-6 mm scrap remained unchanged at VND 9,500/t ($380/t) in the north and VND 8,500-8,950/t in the south. Domestic demand was slightly weak, and billet mills facing losses have resulted in reduced scrap prices. Local prices remain higher than import prices, limiting the potential for increases in the near term.

South Korea: South Korean buyers were largely inactive this week due to weak demand and a slight decline in steelmakers' operational rates. Domestic scrap prices in South Korea remained stable, showing a range-bound trend amid balanced market fundamentals and ongoing supply shortages. H2-equivalent light A grade scrap held steady at KRW 425,000/t ($317/t), while heavy A grade remained unchanged at KRW 440,000/t.

The combined ferrous scrap inventory of eight major South Korean steel mills reached 707,000 t this week, up 2% from 692,000 t the previous week. This marks the first consecutive weekly increase in inventory since March, driven by higher levels of imported scrap arriving at the end of last month.

Taiwan: Demand for Japanese scrap in Taiwan remained sluggish, with offers for H1/H2 50:50 grade scrap at $345-355/t CFR. Taiwanese buyers closely monitored price trends in Chinese billet, which are considered a more cost-effective option amid recent volatility in China's spot market. Chinese 3SP 150 mm billets were offered at $445/t CFR Taiwan.

Feng Hsin Steel, Taiwan's largest rebar producer, kept its rebar prices steady at TWD 18,500/t ($576/t) ex-works for the second consecutive week and continued to pay TWD 9,600/t for local HMS 1&2 80:20 scrap. Prices of scrap sourced from the US and Japan also remained unchanged at $328/t and $345/t CFR Taiwan, respectively.

Outlook: In the near term, Japanese H2 scrap prices are likely to face continued downward pressure due to weak demand from key markets such as Vietnam, South Korea, and Taiwan. Limited buying interest, rising freight rates, and competitive offers from other exporters are key contributing factors. Prices may decline further until mid-September, particularly as buyers in Vietnam and Taiwan wait for cheaper alternatives like billets. Overall, global demand remains soft, indicating the potential for additional price drops ahead.