It was already known that South Korean steel mills are focusing on domestic scrap and that their long-term aim is to secure all their needs from their domestic market. South Korea’s domestic scrap generation supplies 84-85 percent of the total scrap needs in the country. While working with this strategy, some South Korean producers have signed long-term agreements with some Japanese scrap yards as joint ventures. Due to these contracts, their Japanese H2 scrap purchases are now considered as “domestic scrap.” A source at a major South Korean mill commented this week that the South Korean producers do not want to participate in the spot market. Also, some South Korean producers now have long-term scrap supply contracts with Russia. SteelOrbis has learned that the producers fixed ex-Russia scrap prices with the formula of domestic scrap quotations plus additional sea freight rates, though the scrap supply coming out of Russia is a bit thinner nowadays. The construction sector in South Korea also faces problems. Increased interest rates are causing lower house sales and two of the biggest construction companies in the country now face risks of bankruptcy.
SteelOrbis has learned that Japanese H2 scrap offers to South Korea stand at JPY 55,000/mt CFR, with the freight at around JPY 3,700/mt for H2 grades. This information signals Japanese H2 scrap prices at JPY 51,300/mt FOB or $339/mt FOB, only slightly lower than the Tokyo Bay prices for this grade.
As of today, March 29, Tokyo Bay FAS-based prices for H2 grade scrap are at JPY 51,000/mt ($337/mt). This level shows that FOB prices are at JPY 52,000/mt ($344/mt) for this grade. Tokyo Bay FAS prices for HS grade scrap are at JPY 54,500/mt ($360/mt), while prices for shindachi scrap are at JPY 53,500/mt ($354/mt) FAS.
Meanwhile, ex-US bulk HMS I/II 80:20 scrap offers to South Korea now stand at $385-390/mt CFR. However, SteelOrbis has learned that the bids received from South Korea stand at $370/mt CFR, with the gap between the price ideas of buyers and sellers being wide.
Along with South Korea, Vietnam’s import scrap demand is also on the low side. Vietnamese producers are focusing on domestic scrap, lowering their prices instead of negotiating with the import scrap suppliers.
Japanese H2 scrap offers to Vietnam are in the range of $372-375/mt CFR, remaining stable week on week. Additionally, Japanese HS scrap offers are at around $410-415/mt CFR. It is reported that ex- Hong Kong bulk HMS 50:50 scrap quotations are currently at $370/mt CFR.
As a result, SteelOrbis’ reference price for ex-Japan H2 scrap have moved up from the lower end by JPY 1,000/mt or $5/mt to JPY 50,500-51,500/mt ($333-341/mt) FOB by the end of the week. The lower end is represented by the deal closed by Taiwan and the upper end has been left unchanged week on week due to the price indications coming out of other regions.
$1 = JPY 151.21