Japanese ferrous scrap prices have continued decreasing during the week, with sluggish export demand as well as lower export booking prices, trading sources in Tokyo said.
S&P Global Platts assessed Japanese H2 grade ferrous scrap export prices at Yen 24,500/mt FOB ($219/mt) FOB Tokyo Bay Wednesday, the implied price is Yen 1,750/mt lower from the mid-point of previous week's assessment at Yen 26,000-26,500/mt FOB.
South Korea's leading electric arc furnace mill, Hyundai Steel, placed its bid at Yen 25,500/mt FOB for H2 material on Thursday but revised its bid to Yen 25,000/mt FOB on Friday, a source close to the company said.
On Thursday right before Hyundai placed its bid, South Korea's Dongkuk Steel Mill also placed a bid at Yen 24,000/mt FOB for H2 material, but trading sources in Tokyo said no booking at Yen 24,000/mt FOB was confirmed.
A Tokyo-based scrap trader said Hyundai's revising bid means Yen 25,500/mt FOB was too high. The company had received offers at that price.
"Also the company saw the prices were decreasing rapidly and lowered its bid to Yen 25,000/mt FOB," she said.
Other South Korean mini-mills have held private negotiation with Japanese traders and heard booked H2 material at Yen 24,500/mt-25,000/mt FOB on Friday, Tokyo-based sources said.
"We still receive queries from South Korean mills and their price idea this week is Yen 24,500/mt FOB," the Tokyo-based scrap trader said.
"As domestic prices have decreased further, we will be able to accept Yen 24,500/mt FOB for now," the trader added.
Japanese traders are currently paying Yen 22,000/mt FAS to collect H2 material to be exported from eastern Japan, down Yen 2,500-3,000/m from a week ago.
Japan's leading mini-mill, Tokyo Steel Manufacturing, has cut its scrap buying prices by Yen 1,000-1,500/mt for all grades at all works and steel center effective from May 2 arrivals. The company's H2 buying prices truck delivered to its Utsunomiya works, north of Tokyo, have become Yen 23,500/mt. Other mini-mills have also followed and cut similar range on their scrap buying prices.
Supply of low-priced Chinese scrap exports continue to dominate the bulk import market for scrap in East Asia. Since their appearance during the past two weeks, regional mills have had minimal appetite for US heavy melting scrap, regional sources in South Korea and Vietnam said.
In South Korea and Japan, trading sources said that leading electric arc furnaces Hyundai Steel and Tokyo Steel Manufacturing are now planning to carry out due diligence of Chinese scrap and they are expected to procure Chinese scrap in the near future. However, the scrap markets in South Korea and Japan remain quiet due to the Golden Week holiday season.
Last week, one South Korean mill was widely heard in the region including South Korea, China, and Vietnam to have booked several thousand mt of shredded grade China-origin scrap at $260/mt CFR South Korea. This was down $6/mt from a previous South Korean booking price of the same grade China-origin scrap during the week of April 17.
Many market participants including China-based traders continue to question how Chinese scrap exports are coming out at such competitive prices despite the current 40% export tax as well as a 17% VAT levied on Chinese scrap exports.
While some trading sources in China claim that Chinese domestic prices for HMS I/II 80:20 equivalent grade scrap are prevailing at below $180/mt or even as low as $150-160/mt, other Chinese traders said that these prices were too low.
"Since Chinese domestic prices are at such a low level, there are no issues to make some sales even with the export duty," a Chinese trader said.
Trading sources said that Chinese scrap prices are depressed due to the sudden supply of scrap brought about by the Central Government's directive to eliminate induction furnaces. Last year, it was estimated that steel produced from induction furnaces totaled approximately 30-50 million mt.
On the other hand, another Chinese trader said he cannot understand how those scrap could be exported at such low prices because domestic 80:20 equivalent scrap prices are prevailing at around Yuan 1,650/mt ($239/mt).
Low-priced scrap is arising from the closure of scrap yards in Ningbo city in Zhejiang province, eastern China, a South Korean trader said. The scrap yards in Ningbo city had stocked up around 2-3 million mt of "light grade" ferrous scrap extracted from mixed metals after removing non-ferrous materials, he added.
"Those yards holding the light grade scrap are trying to get rid of those inventories and are willing to pay the export taxes and VAT due to the ongoing closure," the trader said.
However in Vietnam, mills are also holding off their bookings of Chinese scrap due to quality concerns, a Vietnamese source said.
"Currently, no one wants to be the first buyer of Chinese scrap because they are not sure about the quality," the source added.
Due to the sudden availability of cheaper Chinese ferrous scrap, regional mills including South Korea and Vietnam are holding off any bookings for US deep sea cargoes, sources said.
On Wednesday, Platts maintained its East Asian bulk HMS I/II 80:20 scrap assessment at $255-265/mt CFR with the implied midpoint of $260/mt CFR.
