Major South Korean producer POSCO’s efforts to repair mills impacted by the Hinnamnor typhoon earlier this month continue, while negotiations between Hyundai Steel’s workers and management have failed, leading to a strike. Some market players think that the strike may go on for a long time, if management continues to resist the demands of workers. The two steel producers represent approximately 80 percent of South Korea’s steel production. Finished steel prices in South Korea are expected to move up in the coming days, since supply volumes are set to decline under the current circumstances. However, this also means that major South Korean mills will need smaller tonnages of scrap. According to a South Korean contact, “[South Korean players] are quite surprised by the bullish overseas market.” On the other hand, domestic scrap flow has increased in the country, by about 25 percent. While the finished steel market remains poor, due to the strike and scheduled maintenance works, SteelOrbis observes that South Korean mills are in no rush to buy imported scrap.
Under the current circumstances, Hyundai Steel and POSCO have decided to take a break from Japanese scrap this week. On September 22, Hyundai Steel decreased its bids for Japanese H2 grade to JPY 48,500/mt ($340/mt) FOB.
As a result, the reference price for ex-Japan H2 scrap has moved down by JPY 1,500/mt on the lower end and JPY 1,000/mt on the upper end over the past week to JPY 47,000-48,500/mt ($325-335 340-350/mt) FOB. Due to the fluctuation of the Japanese yen against the US dollar, dollar-based prices have declined by $15/mt week on week. The lower end of the range is now represented by Vietnam’s purchase prices, while the upper end has been revised in line with Hyundai Steel’s most recent scrap purchase from Japan.
According to market players, ex-US West Coast bulk HMS I offers to South Korea stand in the range of $405-410/mt CFR. A South Korean source commented that the current offer levels are too high for them, especially with the exchange rate, stating, “It is better to buy Japanese scrap at the moment because we pay in Japanese yen.” On the other hand, taking this week’s CFR Vietnam deal from Australia into consideration, indications for workable ex-US West Coast bulk HMS I scrap levels are at $380s/mt CFR South Korea. Accordingly, last week’s comment from a South Korean contact stating that “below $380/mt CFR could be something South Koreans may consider for ex-US HMS I scrap” is still valid.
$1 = JPY 144.65