Slower demand pushes Japanese scrap exports down

Japanese exports of ferrous scrap fell in May as the two largest Asian buyers reduced procurement.

Ferrous scrap exports from Japan totalled 687,060t in May, down by 23.9pc on the month but up by close to a third on the year. January-May shipments rose by 37.7pc on the year to just over 4mn t.

The fall in exports was somewhat limited by a rise in shipments to Asian countries other than Japan's two largest customers South Korea and Vietnam, which both saw a significant drop in shipments.

Exports to South Korea fell by 49pc on the month to 178,464t in May — the lowest since November 2015. Demand from South Korean mills was low, as they planned to cut steel output further in the second half of this year amid slow domestic and export steel demand. Most South Korean mills were therefore not active in the seaborne market in mid-April to May and relied heavily on domestic scrap. Japanese scrap exports to South Korea totalled 1.371mn t in January-May, down by 23pc from 1.791mn t in the same period last year.

Japan sent 170,679t of ferrous scrap to Vietnam in May, down by 43pc month on month but up by 79pc on the year. Vietnamese mills' interest in Japanese scrap started to fade in mid-May as offers began to rise amid a fall in domestic scrap flows in Japan, driven by a slowdown in manufacturing and construction activity owing to the Covid-19 pandemic. Vietnamese mills bought domestic steel billet instead of seaborne scrap because the rise in seaborne scrap prices far exceeded the increase in domestic steel prices.

Taiwan was the third-largest buyer of Japanese scrap in May. Shipments to Taiwan stood at 137,546t, up from 101,262t in April, while January-May shipments more than doubled on the year to 541,678t. Japanese scrap in Taiwan was very competitive in April-May, as its premiums to US scrap fell to $5/t on some occasions compared with a typical premium of $10-15/t. Japanese scrap exports to Taiwan will probably fall in June after mills lost interest in Japanese scrap following significant price rises in late May.

Sales to Bangladesh totalled 354,068t in January-May, up from 55,553t in the same period last year. This was driven by healthy domestic steel demand that allowed buyers to pay higher prices to secure good quality scrap. Bangladesh did not buy any scrap from Japan in March-May last year.

Limited availability of domestic scrap in Malaysia drove mills to seek material on the seaborne market. Japan sent 103,714t of ferrous scrap to Malaysia in May, up by 160pc on the month, while sales in January-May rose by 280pc to 234,146t. Malaysian mills' requirement for seaborne scrap will increase further, as a rise in overseas investment drives steel production capacity while the growth in domestic scrap supply is likely to lag.