Japanese steel mills have announced price increases in a bid to pass on high raw material costs, but it is doubtful how far these will penetrate.
Car production is expected to recover from 3.3 million units in the first half of 2020 to 4.5 million units in the second half of the year, but some construction work has been delayed owing to the Coronavirus. Many hotels nationwide have been forced to postpone or cancel their plans because of the sudden decrease in foreign visitors to Japan. In addition, there is a headwind in building construction plans owing to the strengthening theory that offices are unnecessary and to the deterioration of the clothing and restaurant industries.
The uncertain economic outlook and the drop in steel and scrap prices on Chinese spot and futures markets have led to a sense of caution in the steel scrap market, which hit a year-to-date high in early September and is now entering an adjustment phase. The export price has slipped from a peak of Yen 30,500 per tonne FOB (US$ 290.48) for H-2 scrap to Yen 28,000-28,500 (US$ 266.67-271.43) at the time of writing.
South Korea, which is highly dependent on exports, has become more susceptible to global economy effects. Exports have fallen sharply since April this year and the Bank of Korea drastically reduced its economic growth rate projection for 2020 from -0.2% in May to -1.3% in August.
Crude steel production in South Korea amounted to 38 million tonnes in January-July 2020, down 9.6% year on year. January-August steel scrap import volumes were down 34.8% year on year at 3 million tonnes, partly due to the country’s rising supply/demand scrap ratio. The domestic price of lightweight A scrap (equivalent to Japanese H-2 scrap) is Won 305,000-315,000 per tonne (US$ 260.46-269.00).
* The exchange rates used in this report are Japanese Yen 107 and Korean Won 1171 to the US dollar.
Metz Corporation (JPN), Board Member of the BIR Ferrous Division