Quarterly Report – April 2020

The price increases in the Taiwanese steel scrap market during the last two weeks of February proved to be transitory. Throughout the month of March, Taiwanese rebar buyers remained on the sidelines working through inventories, putting pressure on rebar prices and hence steel scrap prices. Moreover, Japanese steel mills were faced with domestic steel production decreases owing to lower consumption, thereby lowering their domestic scrap prices. This prompted Japanese ferrous scrap exporters to pursue higher-margin markets such as Taiwan and Vietnam. As a result, steel scrap prices in Taiwan from the country’s two main suppliers - the USA and Japan - were down 13% on average in March when compared to February, while total scrap imports into Taiwan from the same two nations were reported to have decreased by 14% on average month over month.

As Taiwanese rebar buyers remained sidelined throughout much of March, steel scrap from Japanese and US suppliers continued to be sold at lower prices into Taiwan. Consequently, the first week of April resulted in the lowest US ferrous scrap price to Taiwan since 2016. Subsequent weeks in April, however, have seen resistance from US scrap suppliers as material out of the USA has diminished owing to the nationwide lockdown to combat COVID-19.

The Taiwanese government is forecasting its economy will expand by 2% this year, which conflicts with the International Monetary Fund’s forecast of a 4% contraction. Nevertheless, whichever figure is closer to the ultimate outcome, it is likely to be a better result than for many other developed economies.

Positive figures have been reported in Taiwan’s export orders which rose over 4% in March compared to a year earlier. The higher export numbers are mostly due to new electronic orders as most of the world increases its demand for work-from-home products. Meanwhile, the majority of steel is likely to continue to be utilized domestically. Even with the upcoming summer electricity restrictions on the mills, current production rates are expected to remain consistent.