While all players in the Southeast Asia have focused on the US Federal Reserve’s upcoming interest rate announcement, raw material and steel demand in Vietnam is still sluggish. According to a source, “The anticipated 75 base points of a rise in the US interest rate may make things worse.” Over the past week, Vietnamese buyers achieved lower import scrap prices in deals done from Japan and Hong Kong, while US-based suppliers have taken a step back from the market as they cannot compete with such price levels. One market player stated that there is a 70 percent chance of a further decline in scrap prices, though adding, “Chinese mills are restarting and seasonal demand should be better in September.” Despite some positive signs, the possibility of a downward movement is greater for now.
SteelOrbis has learned that an ex-Hong Kong deal for HMS I/II 50:50 scrap by bulk to Vietnam was closed at $360/mt CFR as compared to the level of $383/mt CFR recorded last week. As prices declined by $23/mt, market players state that buyers are now targeting for $345/mt CFR, though they have failed to achieve this level yet.
A Vietnamese buyer successfully concluded a deal for Japanese H2 grade scrap at the last-week’s targeted price of $370/mt CFR towards the end of last week. This deal means that Japanese H2 scrap quotations declined by $10/mt week on week. This week, buyers target lower levels in the range of $355-360/mt CFR for this grade. A Japanese source stated that they do not anticipate a lot of demand from Vietnam, given the sharply dropping billet prices in the region. “Billet offers are as low as $510/mt CFR SE Asia. It is barely breakeven from mills,” a source told SteelOrbis.
The price of $370/mt CFR fixed for ex-Japan H2 in Vietnam translates to JPY 42,000/mt FOB or slightly above, given $60/mt freight from Japan, while last week the highest price level for the export market in Japan was JPY 44,000/mt FOB.
Meanwhile, Tokyo Bay FAS-based prices for H2 grade are still at JPY 39,500/mt today, July 27, equal to JPY 40,500/mt ($296/mt) FOB. As a result, the reference price for ex-Japan H2 scrap has been settled at JPY 40,500-41,000/mt ($296-300/mt) FOB, with the higher end of the range down by JPY 3,000/mt from last week due to lower bids coming from Vietnam.
According to a market player, “Nothing from the US this week. Vietnamese mills are focusing on materials from Japan and Hong Kong as prices are more competitive from these origins.”