Ferrous scrap prices rose in most Asian regions in the last quarter of 2023 and this optimism will likely extend into 2024, but uncertainties from wider markets could stifle the bull run.
Fourth-quarter Asian scrap prices were supported by firmer Turkish imported scrap prices, rising US domestic scrap prices, and Beijing's real estate sector stimulus measures.
Asia's scrap benchmark — the Taiwan containerised HMS 1/2 80:20 index — rose by $24.50/t on the year to $384.50/t cfr on 12 December. The Japan H2 export prices increased by ¥2,700/t ($19/t) on the year to ¥51,000 on 12 December, and the Vietnam HMS 1/2 80:20 prices rose by $15/t from a year earlier to $395/t on 8 December.
Taiwan
Taiwan's scrap demand has been robust throughout 2023, supported by firm steel demand, especially for long products. It imported 2.9mn t of scrap over January-October, of which around 42pc came from the US, with volumes already nearing the 2.91mn t of imports for the whole of 2022.
Taiwan's government approved a plan to help first-time home buyers in August, which aims to raise the maximum mortgage loan amount and term, extend grace periods on mortgages, and expand its mortgage subsidy program to reduce interest rates for first-time borrowers by 0.25pc for three years. It has also allocated a 24.5bn new Taiwanese dollar ($776.8mn) budget to enhance transportation infrastructure from 2025, which may further drive steel demand.
Taiwan's presidential election on 13 January 2024 will be a highly scrutinised event, as geopolitical tensions between China and Taiwan peaked in 2022 and have remained elevated this year. The presidential election results will have a direct impact on the future US-Taiwan-China relationship.
"Nobody wants yet another war, but tensions [between China and Taiwan] have been building up this year," a trader said. "And we saw how steel and scrap prices spiked owing to geopolitical tensions last year."
Vietnam
Vietnam's steel industry grappled with sluggish domestic demand for most of this year, because of a credit crunch and stricter regulations on property developers that led to reduced steel sales and scrap consumption.
Ferrous scrap imports fell by another 6.1pc on the year to 3.49mn t during January-October, after a staggering 34pc year-on-year decline in 2022. But construction steel prices in Vietnam bottomed out in October, albeit at a slow pace, and mills resumed sourcing for seaborne scrap cargoes. The country's steel market outlook looks brighter in 2024 because of the government's various initiatives, which include interest rate cuts, bond maturity extensions, and debt restructuring aids.
China, South Korea
Sentiment and market outlook in China, which imported 69,038t of scrap during January-October, were bolstered after the Chinese steel market rebounded significantly in late October because of Beijing's announcement of a 1 trillion yuan ($140bn) special refinancing bond.
Market participants expect China will likely lift scrap imports in 2024, as several Chinese mills sought seaborne scrap in late November because of a substantial rise in domestic steel prices.
But this optimism faded quickly and concerns arose, with trade sources suggesting the surge in prices was sentiment-driven without any increase in steel demand. Financial concerns over struggling developers have also posed headwinds for the housing sector. This resulted in potential homebuyers holding back on new home purchases, which weighed on steel and scrap prices.
In South Korea, underwhelming steel demand weighed heavily on the country's scrap procurement appetite. It only imported 3.31mn t of scrap across January-October, down by 18pc on the year. But demand could rebound, as scrap prices recovered in December.
