South Korea: Steel mills put a brake on scrap purchases due to price rally

Electric arc furnace (EAF) steelmakers' scrap purchasing power has slowed down due to the continuous rise in scrap prices and producers are worried about stock replenishment. Market participants are of the opinion that they should change the purchasing strategy to overcome the current situation, as per a SteelDaily report.

Although imports have risen, the daily stock consumption and maintenance by mills are relativey lower. Besides, prices of scrap are elevated due to the trade tensions triggered by the Russia-Ukraine conflict.

A steel mill official said: "There is nothing we can do right now other than to raise the price. The price increase is not to increase the purchase volume, but to maintain the distribution volume."

Contradicting his statement, another official said: "If the price is not passed on, there is no choice but to cut production, and if production cut spreads, the price will fall."

In such an environment where mills are hesitating to purchase in large quantities regardless of domestic purchases or imports, the price would continue to rise in the near term. If the mills delay in signing new contracts while the stock is low, a supply shortage can further fuel price hikes.

In line with growing demand, Hyundai Steel hiked bids for Japanese scrap last week by JPY 7,000/t ($60/t) against the bid presented on 3 Mar. Bids for H2 grade are now at JPY 63,500/t ($544/t), while for HS grade bids are at JPY 68,500/t ($587/t) FOB.

The purchasing team of steel mills should focus on a new strategy on inventory expansion as scrap prices in the international and domestic markets escalate sharply, creating unstability in the market.

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