Vietnam: Imported ferrous scrap market remains stagnant amid bid-offer disparity

Prices of imported deep-sea bulk scrap into Vietnam have remained stagnant this week. Many mills in Vietnam are hesitant to actively participate in the seaborne deep-sea bulk scrap market due to lean profit margins and weak steel sales, leading to an uncertain market outlook.

The ongoing uncertainty has been exacerbated by the unstable electricity supply in North Vietnam, which directly impacts the planning and operation of steel mills in the region.

Indicative bids for HMS(80:20) scrap were at around $405-410/t CFR, but sellers found this price unworkable and too low. Similarly, H2 scrap indicatives stood at 390-400/t. However, Vietnamese buyers are not satisfied with these prices and have set their target price significantly lower, resulting in a gap of about $20-$25/t between offers and bids.

The situation has led to a lack of interest in exporting H2-grade scrap due to the unfavourable offer-bid price gap. On the other hand, some Vietnamese mills may consider purchasing deep-sea HMS 80:20 scrap as long as the price is competitive in the current tepid market.

Meanwhile, in Taiwan, seaborne scrap prices witnessed a downtrend due to weak demand. Taiwanese buyers lowered their target prices in response to subdued downstream demand and declining Turkish scrap prices.

"Heard Taiwan is going up this week, yet no significant changes in other South Eastern scrap markets," a trader source informed.

Key updates:

The Vietnamese ferrous scrap market currently faces several challenges, including lean profit margins, weak steel sales, an offer-bid price gap, as well as trade restrictions in the form of extended tariffs imposed by the EU.

EU extends tariffs on steel exports: Vietnamese steel exporters are facing challenges in exporting to the European Union. The EU has extended tariffs and quotas on various types of steel imports from Vietnam until June 2024 to protect its domestic steel industry, which has been experiencing significant losses.

Under the European Commission's allocation system, each country has a specific quota, while the remaining countries share a common quota. Imports that exceed the quota are subject to an additional 25% duty.

Vietnam's PMI recovers but still under 50: Manufacturers in Vietnam continued to struggle in the face of weak market demand as the second quarter drew to a close. Output and new orders fell again, with the former, in part, reflecting power outages caused by heatwaves.

EU provides 142 million euro aid: The Ministry of Industry and Trade and the EU Delegation to Vietnam organised a policy dialogue on the Vietnam-EU Sustainable Energy Transition Program on 30 June.

The EU has pledged 142 million euros in non-repayable official development assistance (ODA) for the Vietnam-EU Sustainable Energy Transition Program.

Outlook: Vietnamese steel mills may struggle to handle high Japanese scrap prices. Market participants anticipate possible a decrease in offers in the coming weeks, which may impact overall market dynamics.