South Korea: Ferrous scrap inventories touch 1-mnt mark in early Jul'23, up 8% w-o-w

Steel scrap inventories have once again surpassed the 1 million-tonne mark, signaling a challenging road ahead. The pace of price cuts is accelerating, but unfortunately, inventory levels are also on the rise. This development raises concerns about the protracted nature of the economic downturn.

In the current week, combined stocks of steel scraps among eight major steelmakers reached a total of 1.045 million tonnes (mnt), reflecting a significant increase of 81,000 t or 8.4% compared to the previous week. This weekly inventory growth of 80,000 t represents the largest surge witnessed so far this year. Notably, inventories expanded in both the central and southern regions.

Southern region:

• The total inventory of steelmakers in the southern region reached 440,000 t, showing an increase of 42,000 t or 11% from the previous week.
  
  
• POSCO experienced the steepest inventory growth, with a 21% increase compared to the previous week. This surge in POSCO's inventory contributed to the steep inventory growth in the southern region.
  
  
• Daehan Steel and YK Steel combined saw a 4% increase in their inventories.
  
  
• Hyundai Steel's Pohang plant posted a 9% inventory increase.
  
  

Central region:

• All steelmakers in the central region witnessed a relatively even growth in their inventory levels.
  
  
• Hyundai Steel's Incheon and Dangjin factories saw inventory growth of 11% and 5.6%, respectively.
  
  
• Dongkuk Steel's inventory increased by 4.4%, while Hwanyoung's inventory rose by 8%.
  
  
• The inventories of steelmakers in the central region totalled 605,000 t, reflecting an increase of 39,000 t or 6.9% w-o-w.
  Steel mills in the Busan-Gyeongnam region have maintained a daily average stocking volume of 10,000 t since early July. On 14 July, 14,400 t of scrap were received daily following a price reduction. The volume of transported goods shows no change with price fluctuations. Suppliers continue to supply scrap and anticipate further price cuts. The mid-July to late-August period marks an off-season with reduced production volume and inventory.

  Prices are expected to hit a bottom and rise after August. Price cuts fail to prevent rising inventories, as production and scrap consumption decline while stocking volume remains steady. Steel scrap inventory initially reached 1.1 mn t in July. However, if the current trend persists, steel scrap inventories are likely to continue increasing until the end of July.

  The steel products market is weaker than last year, with no signs of recovery, making it uncertain if demand will rebound after September. Suppliers are maintaining or increasing supply rotation, potentially delaying inventory reduction compared to previous years. Steelmakers have observed reduced scrap consumption but are receiving significant amounts of storage, challenging the perception of an off-season.

  Average steel scrap inventories among steelmakers have been declining annually, pushing the threshold for inventory shortages lower. The average inventory of eight steelmakers dropped from 1.01 mnt in 2019 to 863,000 t in 2023.
  
  

Note: This article has been published in accordance with an article exchange agreement between SteelDaily and SteelMint.