The South Korean steel market has been impacted negatively by higher product inventories resulting from the eight days of the South Korean truck drivers’ strike, which began on June 7. Some producers such as Hyundai Steel had announced temporary suspensions of operations. South Korean steelmakers are also mentioning that their local scrap market is falling sharply, while they are not experiencing a similar trend for scrap import prices. While South Korea is still not showing interest in Japanese scrap, it is observed that South Korean buyers have reduced their domestic scrap procurement quotations once again in the current week.
The lack of demand from South Korea is taking its toll on the Japanese scrap market. It is known that Japanese suppliers are trying to lower their export prices to attract demand, while they continued to sell at higher levels to domestic mills. Nevertheless, Japanese exporters' offers for H2 scrap are still considered to be high as compared to the competitors. News of Tokyo Steel, the major EAF-based steel producer in Japan, unusually deciding to cease acceptance of domestic scrap at its Utsunomiya plant starting from today, June 30, until July 4 due to excess inventories is also not helping. A Japanese scrap supplier commented, “In Japan, the domestic scrap market is still kept at high levels as compared with international levels. Of course, the price is going down along with the international market, but a bit slower. So, the price gap between domestic prices and international prices is still huge. However, some domestic mills will cut buying volumes from next month due to decreasing product orders and shortages of electric power in the summer. As a result, we have to watch the demand balance and the market price.”
SteelOrbis has learned that Tokyo Bay FOB-based prices for H2 grade are at JPY 50,000/mt this week, declining from JPY 52,000/mt FOB recorded last week. This week’s prices translate to $418/mt CFR South Korea, with $50/mt freight.
As a result, the SteelOrbis reference price for ex-Japan H2 scrap has settled at JPY 46,500-50,000/mt ($342-368/mt) FOB, with the lower end representing Japanese H2 offers to Vietnam. Over the past week, prices have moved down by JPY 5,500/mt or $43/mt on the lower end and by JPY 2,000/mt or $17/mt on the upper end. The depreciation of the Japanese yen against the US dollar has contributed to the fall observed in dollar-based quotations.
Meanwhile, Hyundai Steel and Dongkuk Steel have announced further reductions for their domestic A weight scrap prices at the Incheon, Dangjin and Pohang plants. The reduction will total KRW 30,000/mt in two consecutive steps on July 1-2 for Hyundai and in only one move for Dongkuk on July 2. As a result, domestic scrap prices of the two major South Korean steelmakers will be in the range of KRW 562,000-565,000/mt ($437-440/mt).
$1 = JPY 135.69
$1 = KRW 1,284.75