South Korea: Scrap inventory at steel mills rises over 4% w-o-w

• Steady warehousing persists despite production cuts, with expected inventory growth due to price cuts and intensified reductions.
  
  

The accumulation of scrap inventory with South Korean steelmakers, observed last week, persists for the second consecutive week. Steelmakers have actively implemented production cuts while maintaining a certain level of stockpiling. This week, the combined scrap inventory of the eight steelmakers reached 868,000 tonnes (t), indicating a 4.2% increase, or cumulative growth of 35,000 t on the week. Inventories either increased or remained stable across steel mills.

Inventory growth in the Southern region:

The surge in inventory is particularly noticeable in the southern region, led by steelmakers in the Busan-Gyeongnam area. The total inventory at steel mills in the region reached 396,000 t, marking a 3.66% rise, or 14,000 t w-o-w. Korea Steel witnessed an 11.6% rise in inventory, while Daehan Steel and YK Steel collectively witnessed a substantial 27.6% rise.

The inventories of the three Busan-Gyeongnam companies rose by 20.7% w-o-w. These increments are primarily attributed to the implementation of production cuts since mid-June. Notably, YK Steel reported a significant decline in production.

Despite production cuts, the influx of scrap stocks into mills has led to continuous accumulation of inventory. Rebar producers in the Busan-Gyeongnam region, receiving on average less than 10,000 t/day until the previous week, saw inflows increasing to 11,000-12,000 t/day. On 23 June, inflows exceeded the average daily warehousing volume of 11,600 t for this year. While POSCO's inventory showed a steady 2% increase w-o-w, Hyundai Steel's Pohang Plant recorded a slight decrease in inventory.

Inventory growth in Central region:

Steelmakers in the central region have also witnessed inventory growth. Hyundai Steel recorded an 8.3% and 6.7% increase in inventory at its Incheon and Dangjin plants, respectively. This rise can be attributed to the continuous influx of imported goods since last month, coupled with reduced production due to ongoing factory maintenance. Hwan Steel's inventory remained at the same level as the previous week, while Dongkuk Steel witnessed a slight 1% increase in inventory. Overall, the total inventory of steelmakers in the central region amounted to 472,000 t, up 4.7% or 21,000 t w-o-w.

Outlook

• Price cuts by select steelmakers likely to contribute to increased inventory
  
  
• Anticipated follow-up by rebar makers in implementing price cuts, leading to further inventory accumulation
  
  

Scrap inventories with steel mills is projected to grow in the coming week. There is a possibility of production cuts by Dongkuk Steel during nighttime operations, and some steelmakers have recently implemented price cuts after an extended period. This is expected to contribute to additional inventory build-up.

Sae-A Changwon Special Steel has already reduced scrap purchase prices on 27 June, with Korea Steel following suit the next day. It is highly likely that rebar producers in the surrounding regions will align with Korea Steel's price cuts.

Given current market conditions, with no immediate price rebound anticipated, the increase in stocks this week will inevitably lead to further accumulation of inventory.

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