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Vietnam: Imported bulk scrap offers drop by $5/t w-o-w on tepid demand, high steel inventories

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Melting Scrap

BigMint Bureau

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2 Dec 2024, 18:19 IST

Vietnam: Imported bulk scrap offers drop by $5/t w-o-w on tepid demand, high steel inventories

Low EAF mill activity pushes down scrap demand

Rumours of China-US trade war halt procurement

Vietnam's imported bulk ferrous scrap offers dropped by up to $5/tonne (t) w-o-w due to subdued demand, stemming from slow longs sales, and high steel inventories.

The demand for deep-sea scrap remained low throughout the week due to competitively priced alternatives and low operation rates at electric arc furnace (EAF) mills, which ran at 60-70% of their capacity.

Additionally, Vietnamese steel mills refrained from making purchases due to worries about a possible trade war between China and the US.

CFR assessments

Deep-sea bulk US cargoes of HMS (80:20) stood at $360/t, down by $5/t w-o-w.

Japanese-origin H2, a major tradable grade in Vietnam's scrap market, was at $333/t, down by $5/t w-o-w.

Market scenario

"The market is very weak, with deep-sea cargoes seen as being too expensive and risky to import, especially for large volumes. Some mills have refused to make bids," said a Vietnam-based trader source.

Notably, although offers for US-origin deep-sea cargoes declined w-o-w to $360-362/t CFR Vietnam, bids were even lower, at around $345-348/t. The persistent, wide gap between bids and offers limited consensus over tradable prices.

Meanwhile, the unfavourable USD-JPY exchange rate is making it hard for Vietnam to buy H2, and due to weak domestic demand and slow government investment, there is low liquidity in the H2 spot market. A market participant also stated, "H2 freights remain high due to limited vessel availability, which hampers any near-term price increases, especially given the weak demand from buyers."

Commenting on the longs market, a trader highlighted, "Vietnamese mills held their official long steel offers steady but began providing discounts, observing a weak market. Prices are expected to decrease in early December."

Additionally, domestic scrap demand declined this week, due to weak demand and a sluggish economy, even after the rainy season ended. Mills are only buying what they need and avoiding excess inventory. Blast furnaces may be an exception, as they need to be run continuously.

Northern Vietnam-based mills reduced domestic H2 prices by VND 100-200/kg ($4-8/t) w-o-w to VND 8,400-8,900/kg ($331-351/t) DDP, while in southern Vietnam, tags stood at VND 8,300/kg ($327/t). H1 offers in northern Vietnam fell to VND 8,700-9,100/kg ($343-359/t) DDP.

Outlook

Market participants remain hopeful for restocking demand in the next two weeks, as mills prepare for the new year. Sources are optimistic about spot prices, expecting a rise in construction steel demand following Vietnam's rainy season. Although some construction activity continued during the rain, conditions were less than ideal, but work is expected to ramp up in the dry season, driving demand.