Quarterly Report – July 2019

Japanese steel scrap prices have continued to decline since late March but appear to be finally bottoming out at the time of writing. Over this period, the H-2 price has dropped by Yen 8000-9000 a ton (equivalent to US$ 74.77-84.11 at an exchange rate of Yen 107 to the US dollar).

The major reason for this was the decline in demand for steel scrap owing to a shift in EAF production based on sluggish orders for steel products. In Japan, EAF mills’ production was lower than in the corresponding months of last year for all except February, and the January-May total of 10.633 million tons was down 2.6% from the same period last year. Another factor in the market’s fall was that blast furnaces have substantially reduced the amount of scrap purchased in the domestic market since April.

With intensive summer maintenance planned from the second half of July, demand for steel scrap is expected to continue decreasing.

In the overseas market, the price of iron ore has remained high at US$ 110-120 per tonne and the price for Turkey has rebounded more than US$ 20 per tonne from the most recent low. Given these circumstances, countries such as Vietnam, Taiwan and Indonesia - which have seemed cheap in relation to Japanese steel scrap - have recently begun to buy, so there are growing expectations of price gains among Japanese market participants.

However, South Korea - the largest importer of Japanese scrap - has seen a decline in steel demand owing to its economic growth rate slowing from 2.5% to 2.2%. Demand for steel scrap will also decline in July and August owing to electric furnace maintenance and other factors. In addition, some mills still have a large number of outstanding scrap contracts with Japanese suppliers. So there seems to be no room for price increases.

Scrap flows are reported to be dropping. Owing to the Yen’s recent appreciation and the weak scrap supply-demand balance in Japan, flows are likely to remain flat for the time being, regardless of overseas market movements.          

Hisatoshi Kojo - Hisatoshi Kojo (Japan and South Korea)

Hisatoshi Kojo

Metz Corporation (JPN), Board Member of the BIR Ferrous Division

Japan and South Korea
Quarterly Report – July 2019