Quarterly Report – July 2019

The Taiwanese ferrous scrap market has been moderately consistent, albeit with a few sudden price adjustments, but mostly incremental movements during the summer months. The first week of June brought the highest scrap prices of the second quarter; however, mills were able to quickly fill their scrap requirements and, by the second week of the month, demand waned and prices weakened as more local and imported scrap became available at competitive price levels. Multiple ferrous scrap price drops from the Japanese continued to push prices down and, by the final week of June, scrap prices decreased 10% month over month to just a few dollars shy of the low for the year.

The first week of July saw more positive developments in the steel scrap market, with increased Taiwanese steel demand and better-than-anticipated US domestic prices which have supported scrap prices so far this month. However, as we move into the final summer month of August with continued electricity restrictions, scheduled mill maintenance and holidays, we may see the usual seasonal slowdown.

Taiwanese PMI for June was slightly lower than for May at 48.1, which undeniably represents a trend of manufacturing contraction. Although there may be some downside risk to the economy owing to the enduring trade tensions between Washington D.C. and Beijing, the projection for Taiwanese GDP continues to be annualised growth of 2%, with low inflation and unemployment rates.

Interestingly, soaring imports of machinery parts into Taiwan during June suggest there may be more fixed investment projects underway which may be directly linked to some businesses relocating production away from China.