This year’s so-called “Golden Week” in Japan will bring 10 days of holiday - the longest period ever seen. Steel mills are expected to continue to operate at full capacity but, owing to stagnant construction steel shipments caused by building delays and the increase in imported steel, mills have decided to reduce days of operation and have adjusted production schedules.
As a result, the price of iron scrap - steady at around Yen 35,000 per tonne (US$ 315) until the end of March - turned downwards in April, falling sharply by Yen 5000-6000 (US$ 45-54) in a single month.
The South Korean economy is deteriorating, with the growth rate for the January-March quarter falling to a negative number of 0.3% for the first time in five quarters owing to the effects of the US-China trade war. And because one company has been forced to shut down by the end of June owing to a transformer failure while another must reduce production following a worker’s death at a rolling mill, South Korea’s steel scrap market has loosened greatly and prices have dropped around Won 50,000 per tonne (US$ 43) from their peak level.
It is being suggested that Korean mills’ next purchase target is for arrival in July and so they are unlikely to enter the international scrap market any time soon.
The current market price of Japanese H-2 scrap is around Yen 30,000 per tonne (US$ 270) for domestic and Yen 31,000 (US$ 279) FOB for export.
Given that steel demand in Japan remains firm, demand for scrap is expected to tighten over the April-June period such that there will be no significant fall below current price levels as long as there is no steep drop in the overseas market.
* Unless otherwise specified, the exchange rates used in this report are Yen 111 and Won 1163 to the US dollar while prices relate to Japan’s standard H-2 grade of scrap.
Metz Corporation (JPN), Board Member of the BIR Ferrous Division