South Korea: Scrap inventory at major mills drop by 9% w-o-w

The combined iron scrap inventory of eight South Korean steel firms for the current week reached 697,000 tonnes (t), showing a reduction of 65,000 t or about 8.53% compared to the previous week. Notably, this decline is linked to Hyundai Steel initiating inventory buildup in preparation for long-term maintenance. Furthermore, this continuous decrease, spanning seven consecutive weeks since December last year, marks the first instance in approximately a year - since January of the previous year - that steelmakers' iron scrap inventory has fallen below the 700,000-t threshold.

Region-wise inventory

Central region: The decline appears more pronounced in the central region, where steelmakers' inventories this week totaled 331,000 t - a substantial decrease of 12.8% compared to the previous week. The decrease is attributed to Hyundai Steel's Incheon plant, slated for long-term repairs in February, initiating inventory buildup to ensure a smooth supply. This buildup is believed to have led to an increase in iron scrap usage and a significant reduction in inventory.

Southern region: The decline in the southern region was relatively modest. The inventory of steel mills in the southern region stood at 366,000 t, representing a decrease of only 4.19% compared to the previous week.

The industry anticipates that inventory levels for steel producers will either remain stagnant or decrease, affecting even borrowers. This projection is influenced by Hyundai Steel's need to finalise rebar inventory buildup by February, aligning with the commencement of extensive repairs at the Incheon plant. Additionally, the existing inventory level is considerably lower than the average January inventory over the past four years.

In fact, market survey reveals that the average iron scrap inventory in January from 2020 to 2023 was approximately 830,000 t. The current inventory reflects a difference of more than 100,000 t, underscoring the notable deviation from the historical average.

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