The highest bid in Tuesday's monthly auction for Japanese H2 grade ferrous scrap, for export from Tokyo Bay by end-August, increased by Yen 2,110/mt ($19/mt) from last month's winning bid, the auction organizer said.
The winning bid was Yen 28,110/mt ($246/mt) free alongside ship for a 10,000-mt parcel. The second winning bid was Yen 28,100/mt FAS for 5,000 mt, and the third, also for 5,000 mt, was Yen 27,820/mt FAS.
The auction attracted 24 bids for a total of 148,000 mt of scrap. The average bid price was Yen 27,344/mt FAS.
The winning bids were much higher than expected, a Kanto Tetsugen official said. "The winners might be expecting scrap export prices to rise by end-August," the official said. Scrap prices usually decline in Japan in August as construction steel demand slows during the summers.
A Tokyo-based scrap trader said that the traders submitting the winning bids might also have factored in firmer prices for billets when deciding where to bid.
On Friday, S&P Global Platts raised its weekly East Asia assessment for 120/130 mm billet to $440-$445/mt CFR, with the implied midpoint of $442.5/mt up $7.50/mt week on week and up $25/mt month on month.
Another scrap trader in Tokyo said that the latest booking for H2 grade scrap for export -- placed late last week by a steelmaker in Vietnam -- was at $275/mt CFR.
This is equivalent to around Yen 27,400/mt FOB and considerably higher than the most recent booking made by a South Korean mill last week at Yen 26,500/mt FOB, she said.
The parcels secured in Tuesday's auction were most likely destined for Vietnam as well, she said.
"But the winning bid is equivalent to about Yen 29,000/mt FOB and much higher than the current export price level," she said.
"Because of this, we don't believe overseas customers will lift their bid-prices immediately after the tender but will be content to monitor market movements for a while," she said.
Another trader in Tokyo expected the supply-demand balance of scrap in Japan to soften in the weeks ahead, as many mini-mills will halt production in late-July or in August to undertake regular summer maintenance on their equipment. "I really wonder whether these tender results will influence the market," he said.
Late on Tuesday, Japan's leading mini-mill, Tokyo Steel Manufacturing, decided to lift its scrap buying prices at all its steel works by Yen 500-1,000/mt, effective from Wednesday arrivals. From July 12 onwards, the mini-mill will be paying scrap collectors Yen 27,500/mt for H2 scrap delivered to its Utsunomiya works, north of Tokyo.
The second Tokyo-based trader said Tokyo Steel's increase reflected the higher scrap prices that traders are paying collectors in the Tokyo Bay area and he believes it is not a direct reaction to the tender result.
Japanese traders are currently paying Yen 26,000-26,500/mt FAS to gather H2 material for export from eastern Japan, up Yen 500/mt from a week ago.
Trading sources said the increase was due to the active scrap loading of vessels at bay area wharves.
Platts assessed the H2 scrap export price at Yen 26,500/mt ($233/mt) FOB Tokyo Bay on July 5, up from Yen 26,000-26,500/mt FOB a week earlier.
