Fresh S Korean steelmaking cuts smash demand for high-grade scrap

Recent closures and restrictions at several furnaces that produce high-grade steel products across South Korea have worsened demand for imports of Japanese busheling scrap, market sources told Fastmarkets on Friday June 12.

South Korea’s Hyundai Steel stopped operations at its electric-arc furnace (EAF) plant in Dangjin earlier this month. The plant mostly produces flat steel and is located alongside the steelmaker’s integrated works in Dangjin, which comprises three blast furnaces (BFs)
The mill has no plans to restart operations at the shuttered furnace, but will assess the market situation before making a final decision, according to a South Korean source.
Compatriot steelmaker Posco has opted against restarting its No3 BF in Gwangyang following the completion of maintenance works, a second South Korean source said.
The BF was closed for maintenance in the first quarter of 2020 and was scheduled to complete repairs by May 28, according to Posco’s last earnings release on April 24.
The move follows Posco’s decision to stop buying scrap from both the import and domestic markets in the second quarter.
Another significant buyer of Japanese Shindachi scrap is Korean steel pipe producer SeAH Steel. The steelmaker is also in the process of reducing its operating rate, which will lower its output over the next two months, the second source said.
South Korean EAF output fell 9.1% year on year in January-April to 7.10 million tonnes, according to the Korea Iron & Steel Association.
Shindachi pounded
These decisions have halved Hyundai Steel and SeAH Steel’s monthly intake of Japanese Shindachi scrap, according to a Japanese trading source.
Lower demand for Shindachi, together with lower supply of the sought-after H2 grade of scrap, narrowed the premium that the former has over the latter over the last week.
Fastmarkets’ price assessment for steel scrap Shindachi, export, fob main port Japan was ¥29,000 ($271) per tonne on Wednesday June 10, while that for steel scrap H2 export, fob main port Japan was ¥26,500-27,000 per tonne.
This narrows the Shindachi-H2 premium to ¥2,000-2,500 per tonne from ¥2,500-3,000 per tonne a week earlier.
“H2 supply is tight, and Shindachi demand is decreasing,” the Japanese trader said.
Some suppliers are no longer collecting Shindachi, and there is “no market” for the material, according to a second Japanese trader.
“Special steel production is pretty bad in South Korea. Both demand and supply of Shindachi is dead,” the second Japanese trader said.
And while mill operation rates remain low, it is possible for South Korean steelmakers to rely largely on domestic scrap, the second Korean source said.
“[Because] special steel mills are reducing their operating rates in the next few months, the supply of Shindachi and other high grades of scrap is enough in Korea,” he added.

Lee Allen

lee.allen@fastmarkets.com

Published

Lee Allen

June 12, 2020

09:08 GMT

Singapore