S KOREA STEEL SCRAP: Prices down as mill maintenance reduces demand

Prices for cargoes of steel scrap imported into South Korea have dropped over the past week amid lower demand from mills that will take rounds of maintenance during the next few months, sources told Fastmarkets on Friday September 18.

Lower demand from South Korea had already weighed on Japanese export prices by Wednesday, but bearish sentiment had dragged prices down further by the end of the week.
Fastmarkets’ weekly price assessment for steel scrap H2, Japan origin, import, cfr main port South Korea, was ¥29,200-29,500 ($279-281) per tonne on September 18, down from ¥30,000-31,000 per tonne last week.
A deal for H1:H2 was heard closed to a South Korean mill at ¥29,700 per tonne cfr on Wednesday. Sources said that the deal was equivalent to ¥29,200 per tonne cfr for the benchmark H2 grade.
Russia-origin A3 grade material was purchased at $303 per tonne cfr South Korea for an 80,000-tonne shipment, following offers from Russia at $315 per tonne cfr.
“It is not easy to close [import] deals to South Korea - the Korean domestic market is showing a weak trend,” a mill source in the country said. “There is low scrap demand because a couple of mills have major annual repairs in September-October.”
One major South Korean steelmaker will cut its steel production by around 300,000 tonnes over the next month because of maintenance outages, according to a Japanese supplier source.
“Korean mills are waiting for more decreases in the import price for Russian scrap. They are being pushed into the domestic scrap market and, next week, the [Korean] domestic scrap price could be down once more,” a South Korean trader said.
“Prices over ¥27,500 per tonne fob Japan for H2 are difficult to accept for smaller South Korean mills for the time being, and nobody is interested in deep-sea cargoes,” he added.
The Japanese supplier source agreed, saying that there were no Korean mills which could take the lots of 2,000-3,000 tonnes of scrap import cargoes which were currently in the market.
Despite the lower demand across the market for Japanese scrap, one major South Korean mill was heard to have purchased plate and structural (P&S) scrap at ¥33,700 per tonne fob this week. Demand for the grade remained high and supply tight, the Japanese supplier said.
Negative sentiment seeping in
Mill maintenance and cheaper domestic scrap prices were a constant factor underpinning lower prices in Korea throughout the week, but extra pressure on prices was added by bearish sentiment in Japan toward the end of the period.
“In the middle of the week, buyers totally changed their target prices for purchases, and by the end of the week, suppliers had changed their minds too. Japanese suppliers are trying to sell scrap more aggressively now,” a Japanese exporter said.
Offer prices from Japan for H2 started the week at ¥30,500 per tonne cfr South Korea but fell to ¥30,000 per tonne cfr by the end of the week, with even lower prices possible after negotiation, sources said.
“The future of the market is questionable now,” a second Japanese exporter source said. “There are various factors causing this, but I think China has a great influence on what is happening.”
Chinese import iron ore prices have fallen through the week, while rebar inventories remained high with weather conditions worsening in Eastern China ahead of a week-long holiday in the country in early October.
A third Japanese exporter source said that lower interest from Vietnamese mills for Japanese scrap [LINK] was the main factor driving prices downward.
“Japanese suppliers are thinking that the market has almost reached its top. That’s maybe why some are starting to sell. But the Korean scrap price is still good, so I don’t think that prices will go down too fast,” a fourth Japanese exporter said.
Another reason he expected Japanese scrap prices not to crash was higher steel prices in Japan, with some mills announcing new steel price increases on Friday, he said.
With effect from September 16, Tokyo Steel raised its buying price for H2 scrap by ¥1,000 per tonne at its Tahara works and by ¥500 per tonne at its Kyushu works. The mill said that it was paying ¥26,000 per tonne for H2 at its Utsunomiya works. The mill has not changed its prices since.
The purchase of Russian A3 scrap at $303 per tonne cfr South Korea - which was the same price as was achieved two weeks ago - and lower Japanese prices also led to market sources downgrading their estimates of workable prices for deep sea scrap imports to South Korea.
Fastmarkets’ weekly price assessment for steel scrap, HMS 1&2 (80:20), deep-sea origin, import, cfr South Korea, was $300-305 per tonne on Friday, down from $310 per tonne last week.
Sources in South Asia said that several major exporters have withdrawn offers from the market over the past week after they were unable to achieve their offer prices to Bangladesh.

Lee Allen

lee.allen@fastmarkets.com

Published

Lee Allen

September 18, 2020

12:20 GMT

Singapore