The economic environment has deteriorated rapidly owing to the spread of the Coronavirus, and a significant proportion of steel demand disappeared very quickly. For this year’s April-June period, domestic crude steel production is expected to reach 19.355 million tonnes; if this proves so, it will be the first time in 11 years that a quarterly total has fallen short of 20 million tonnes.
Domestic iron and steel scrap supply and demand are shrinking and in balance, and mills are able to cover their volume needs from within a narrow 100 km radius. Mills’ average purchase prices are stable at Yen 18,500-19,500 per tonne (US$ 172.09-181.40). Every April, there is an effort to build inventory for electric furnace production during the Golden Week of Japanese holidays (April 29 to May 6), but there is no such move this year.
The deep-sea scrap market rebounded US$ 50-60 per tonne from its lowest level and the perceived cheapness of Japanese scrap prompted a substantial increase in enquiries from Taiwanese and Vietnamese buyers.
Owing to factors such as lower operating rates among manufacturers and delays to demolition projects, collecting scrap to meet export orders has become more difficult and exporters are competing with each other, leading to higher prices. As a result, the differential to domestic prices has extended to Yen 2000-2500 per tonne (US$ 18.60-23.26) at the time of writing.
South Korean mills have kept their purchase prices for Japanese scrap at Yen 19,500-20,500 per tonne FOB (US$ 181.40-190.70) against a backdrop of reduced steel scrap consumption in response to lower crude steel production.
* In this report, Japanese steel scrap prices relate to the H-2 grade while the exchange rate used is Yen 107.50 to the US dollar.
Metz Corporation (JPN), Board Member of the BIR Ferrous Division