South Korea: Scrap inventories continue a steady fall; 2% down w-o-w

Scrap inventories in South Korea are steadily declining, with a consistent decrease observed. As of this week, the steel scrap holdings of eight steelmakers amounted to 785,000 tonnes (t), marking a 1.8% decline compared to the previous week. While most of the steelmakers experienced a decrease in inventories, the overall reduction in volume was slower than the previous week due to an increase in POSCO's inventory.

Region-wise scrap inventory status

Central region: In the central region, steelmakers' inventory totalled 448,000 t, showing a decline of 26,000 t or 5.5% compared to the previous week. This reduction can be primarily attributed to a significant decrease of over 10% in Hyundai Steel's Dangjin mill inventory. Dongkuk Steel and Hwanyoung Steel experienced a smaller decrease of 3% from the previous week. However, there is a clear trend of inventory reduction among steelmakers in the central region, they maintain the position that there is currently no shortage.

This perspective is based on the expectation that orders contracted in April and early May, during a period of falling prices in overseas markets, particularly in Japan, will be delivered after June. Additionally, the reduced production has led to lower demand for scrap, contributing to the perceived absence of a shortage.

Southern region: Inventories at steelmakers in the southern region have experienced a year-on-year (y-o-y) increase of 4.2%. However, this overall increase was driven by inventory growth at POSCO's and Hyundai Steel's Pohang plants, which subsequently resulted in a decrease in inventory at other Busan-Gyeongnam rebar mills.

Korea Steel's inventories remained unchanged from the previous week, while Daehan Steel and YK Steel saw a decrease of approximately 5% in their inventories compared to the previous week. POSCO's inventory increased by 4.3% from the previous week, while Hyundai Steel's Pohang Works recorded a significant 11% increase. Notably, POSCO witnessed a notable surge in imports since last week, with the arrival of large mother ships from the US playing a significant role in the inventory increase.

A representative from a supplier in the southern region stated, "Because there is an expectation of a price increase, the distribution volume can decrease further."

Busan-Gyeongnam region: The trend of declining inventory is evident as rebar steelmakers in the Busan-Gyeongnam area experienced a decrease in average daily scrap intake. In the fourth week of May, they received an average of 11,740 t per day, which dropped to 10,400 t per day in the last week of May. This figure even fell below the 10,000 t mark in June. Considering the average warehousing volume in 2023 is around 11,700 t, it is evident that inventory levels, which were maintained at the average level until the end of May, are now clearly declining.

A supplier official in Busan and South Gyeongsang province highlighted that while the reduction in scrap generation and intake is apparent, steel mills are not rushing to replenish their inventories.

As a result, steelmakers in the region plan to reduce production by approximately 30% starting in June. With decreasing production and warehousing volume, it is likely that the decline in inventory will further increase in the coming week.

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