South Korea: Scrap imports rise in Sep'20 amid recovery in steel production

South Korea- one of the largest ferrous scrap importer, witnessed an increase of 11% m-o-m in ferrous scrap imports in Sep'20, as per customs data maintained with SteelMint. Covid-19 continued to disrupt domestic and export steel business, which consequently limited steelmakers scrap demand. However, with recovery in steel demand, mills have raised production.

Import volumes from Japan totalled 0.23 mn t in Sep'20, up by 64% from 0.14 mn t a month ago. Other exporters like Russia exported 0.04 mn t, down 20% m-o-m in Sep'20. Imports from the US witnessed sharp decline by 80% m-o-m in Sep'20.

During the first nine months of the year, the country imported 3.12 mn t in Sep'20, lower by 35% from the CPLY due to coronavirus pandemic.

Factors driving South Korean imported scrap volumes in September -

• Recovery in crude steel production -South Korea's crude steel production is observing gradual recovery. Output stood at 5.8 mn t in Aug'20, up by 5% against Jul'20, according to data released by World Steel Association.
  
  
• South Korean mills return to full capacity operations -South Korean steel giant Posco has declared that its mills have returned to full operation levels and Posco's third steel mill in Gwangyang resumed operations in July and all factories are running at near full capacity. The steel-maker's total sales in Q4 CY'20 is expected to bounce back to 8.88 mn t from 7.76 mn t in Q2, driven by strong demand for automobile steel.
  
  
• Recovery in South Korea's automobile sector - Hyundai Steel in its Q2 quarterly report highlighted that country's automobile production is expected to increase to 1.86 million units in H2 CY'20 compared to 1.58 million units in H1 CY'20.
  
  
• Expansion in government investment in construction projects - Construction activities are expected to recover with expansion in govt's investment. Hyundai Steel expects investments to increase from 125 KRW tn in H1 CY'20 to 133 KRW tn in H2 CY'20.
  
  

Quantity in mn t
Source: SteelMint stats and customs data

Outlook - Ferrous scrap imports are likely to remain supported on the back of recovery in steel production.