Quarterly Report – July 2020

Picking up from our previous report in April, the ferrous scrap market was beginning to stabilize in Taiwan as scrap supplies deteriorated in the USA and Japan. Tight supply coupled with Taiwanese steel buyers resuming their seasonal summer construction projects and increased steel consumption pushed prices higher in May. The improvement in scrap prices incentivized collection until mid-June when supply began to outweigh demand and prices were once again under pressure by the end of June. As a result, US and Japanese ferrous scrap prices for June were down just below 2% on average compared to May, while total scrap imports into Taiwan from the USA and Japan were reported to have increased by 12% on average in the same month-over-month period. 

At the time of writing, the ferrous scrap market is seeing some strength going into the latter half of July. However, accelerated supply-driven business cycles are expected to continue in this market until there is a more meaningful recovery in steel demand in the USA, Japan and South Korea.

Taiwan’s PMI reading was 46 for June as compared to an average of 42 for April and March as the manufacturing sector saw a boost in output and new orders. The higher results reflect manufacturing confidence from more relaxed epidemic controls and normalization of economic activity. Although some economic forecasts currently show a decline of 2% in Taiwan’s 2020 GDP owing to disruption to some trade and tourism, the economy overall is demonstrating resilience compared to some of its Asian counterparts.