Vietnam's imported ferrous scrap market remains soft amid lack of buying interest

The Vietnamese imported scrap market experienced a soft performance throughout the last week, witnessing a downtrend in imported scrap prices. Local buyers chose to remain cautious and refrain from active participation. The sluggish construction activity prompted local mills to once again reduce longs prices.

The purchasing prices for domestic H2 scrap from the northern mills are currently in line with import offers. However, scrap collection in the country has been lower, partly influenced by seasonal factors.

Market participants believe that if domestic scrap prices continue to rise, there might be an increase in demand for imported raw materials.

Vietnamese mills are still hesitant to purchase overseas scrap due to the availability of attractive imported billets (starting from $510/t CFR for open origin) and the extremely weak finished products sector. Rebar offer prices in Vietnam dropped by VND 100/kg ($4.2/t) in the latter part of the week, following a decrease of VND 150/kg ($6.3/t) in the previous week.

Scrap offers

• Bulk US-origin HMS 1&2 (80:20) was offered at $385/t CFR Vietnam, indicating a $5/t decline w-o-w, primarily due to weak demand in both the Vietnamese and overseas markets.
  
  
• Japanese H2 scrap was also available at approximately $385-390/t CFR a decrease of $5/t w-o-w, but it failed to attract any significant interest.
  
  

Vietnam's domestic market

• Vietnam's domestic steel market is also experiencing difficulties, particularly in the finished steel production sector, which declined by 20.9% to 13.1 million tonnes (mnt) in the first half of 2023. The weak demand in the local market, driven by slow construction activity, was the primary cause of the decline. The Vietnam Steel Association (VSA) reported that total sales were at 12.48 mnt (a 17.5% y-o-y decrease), with exports witnessing a modest increase of 6.5% to 3.88 mnt.
  
  
• Notably, Hoa Phat Group (HPG), a major Vietnamese steelmaker, saw a decline in crude steel output, down by 23% to 520,000 t y-o-y and sales down by 4% to 540,000 t y-o-y in June. This decline was attributed to a significant drop of 18% y-o-y in construction steel sales.
  
  
• Steel producers anticipate positive outcomes in the second half of the month with government support, expecting the steel industry to overcome challenges in the year's final months. A recent report from the Vietnam Steel Association revealed a 9.1% m-o-m decrease in construction steel production to 738,196 tonnes (t) and a 6% drop in sales to 874,441 t. International market sales declined by 21.5% to 149,623 t. First-half construction steel output was 5 mnt (25.5% decrease y-o-y), with sales and exports down 22.7% and 38%, respectively, to approximately 5.1 mnt and 831,000 t.
  
  

Thailand: Other Southeast Asian markets, such as Thailand, are also facing challenges. The market conditions in Thailand are not favourable, with limited activities reported in imports. Political instability has contributed to the sluggishness in the market, and some regular exporters of Thailand are redirecting their materials to India and Bangladesh, as per market players.

Outlook

Looking ahead, the Vietnamese imported scrap market is expected to continue its downtrend, while market participants may wait and watch for further declines before making buying decisions.