Japan's Kanto scrap export tender bids hit nearly 2-year low amid JPY appreciation, weak demand

The Japanese Kanto H2 scrap export tender concluded today, showing a decline in bids in terms of JPY. Similarly, bids in dollar terms dropped by $23/t compared to August's tender.

This auction price marks the lowest level in nearly two years, since August 2022, reflecting a sharp decline of almost JPY 9,500/t from July to September.

As per market reports, approximately 15,000 tonnes (t) of scrap were likely to be booked by a Chattogram-based mill from Bangladesh at JPY 42,720/t ($303/t) FAS, reflecting a decrease of JPY 5,236/t ($23/t) from August's price of JPY 47,956/t ($326/t).

Notably, Japan's last recorded FOB prices are higher by JPY 800/t compared to current FAS prices.

BigMint's weekly assessment indicates that Japan's H2 scrap export offer was at JPY 43,500/t FOB Tokyo Bay last week.

The appreciation of JPY continues to impact Japanese ferrous scrap prices. As JPY weakened beyond 160 against the US Dollar, it dropped below 150 in mid-August and is now hovering around the 140 range. This rising trend in JPY is influencing price adjustments.

Tokyo Steel scrap purchase price trend

Tokyo Steel further cuts scrap procurement prices by up to JPY 1,500/t ($11/t), from 12 Sep'24 post-Kanto export tender result.

While Tokyo Steel's scrap price cuts might seem linked to JPY's appreciation, the company could also have raised prices to offset fixed costs, anticipating future weakening of JPY. With the U.S. Federal Reserve's expected interest rate cuts in September, further JPY appreciation remains a possibility.

Tokyo Steel has cut domestic scrap procurement prices for the sixth consecutive time in September. It's noteworthy that the total reduction amounts to JPY 3,000/t ($21/t) across major regions, except for Utsunomiya, where the cumulative drop is JPY 3,500/t ($25/t). If we broaden the observation criteria and look at it from mid-August, it has lowered scrap purchase prices a total of nine times.

Prices are now at:

• Tahara, Okayama, Kansai, and Kyushu plants: JPY 43,000/t ($304/t).
  
  
• Takamatsu plant: JPY 42,000/t ($297/t).
  
  
• Utsunomiya plants: JPY 41,500/t ($293/t).
  
  

Buyer-side updates:

• Bangladesh: Despite recent political disturbances, Bangladeshi buyers have maintained consistent participation in Kanto tenders. However, there is a notable lack of interest in long-voyage materials due to uncertainties surrounding sea freight and shipping routes. Recent trades have been concluded with suppliers from Hong Kong, Malaysia, the Middle East, and Oceania. As per market insiders, the difference between CFR and FAS prices is around $60-65/t. Japanese H2 scrap offers are at $380-385/t, while workable levels for CFR Chattogram are around $365-370/t.
  
  
• Vietnam: Vietnamese buyers have shown limited interest in Japanese scrap due to a significant bid-offer disparity. H2 scrap offers last week were at $355-360/t, with bids decreasing to $342-345/t, both down by $5-8/t from the previous week. Additionally, only a few Japanese suppliers have been active recently, likely due to the upcoming summer holidays and expectations of further recovery in the JPY. Offers for Japanese H2 scrap were assessed at $365-370/t CFR Vietnam, while buyers' bids were around $360/t CFR.
  
  
• South Korea: Buyers were less active for a long time in the Kanto scrap export tender as well as stayed out of the spot market due to a sluggish construction sector and weak real estate market, leading rebar makers to scale back production. Mills are also holding off on bidding to avoid pushing prices higher ahead of the Chuseok holidays from 16 to 18 Sept.

  South Korea's major ports saw a fall in fresh scrap arrivals this week, with the total volume reaching 56,538 tonnes (t). This represents a decrease of approximately 5,858 t, or 9%, compared to the previous week. Overall, imports saw a notable decrease. However, imports from plate special steel companies, which need higher quality steel scrap compared to bar steel companies remained strong. Additionally, around 49% of steel scrap imports came from these plate special steel companies.
  
  

• Taiwan: In Taiwan, Japan-origin H2 scrap prices dropped by $10/t to $335/t CFR last week. Despite this trend, the offer-spread gap in Taiwan continues to persist. Taiwanese mini-mills are holding off on adjusting rebar and local scrap prices, opting to wait and assess market conditions during the peak steel consumption season. Market participants noted that Taiwanese mills are increasingly favoring competitively priced containerised scrap from the US.
  
  

Outlook: The recent sharp declines in Japanese steel scrap exports and domestic markets are raising concerns about future price movements in Japan. Weakening demand from Vietnam and South Korea, driven by lower chartered vessel costs and an influx of cheap Chinese billets, is likely to exert further pressure on Japanese export prices.