South Korea scrap imports fall on weaker steel demand

South Korean ferrous scrap imports fell in August as Covid-19 continued to disrupt domestic and export steel business, which consequently limited steelmakers' scrap demand.

The country's scrap imports totalled 284,118t, down by 8.5pc on the month from 310,649t in July. This marked the lowest single-month ferrous scrap import volume for South Korea since December 2008.

Domestic demand for steel and scrap was limited by the slowness of South Korea's "real economy". Housing investment fell as the economy was disrupted by the pandemic while infrastructure projects stalled as the country failed to attract much overseas investment.

Low interest rates prompted capital to flow into equity markets and land acquisitions on speculation of a quick profit if the pandemic ends swiftly, which further limited resources available to steel-consuming sectors.

South Korean finished steel exports were significantly lower in August as demand from overseas buyers fell. Mills cut production to reduce operating costs amid falling steel demand. Mills also raised domestic scrap requirement but lowered scrap collection prices.

Shipments from Japan, the largest ferrous scrap supplier to South Korea in August, fell by 21.1pc on the month to 157,946t from 200,180t in July. Most of the August arrivals were booked in late June-mid-July as prices fell in this period. Mills found Japanese scrap prices too high to consider in mid-end June and made few purchases at that time.

Ferrous scrap imports from Japan totalled 1.98mn t in January-August, down by 28.4pc on the year.

South Korean ferrous scrap imports from the US more than trebled on the month to 47,518t in August. But imports in the first eight months of 2020 halved year-on-year to 404,770t.

South Korean mills that did not collect sufficient scrap in the domestic market in August purchased scrap from the US and other origins when Japanese scrap prices rose too high.

Shipments from Russia increased by 19.7pc on the month to 58,729t in August. Mills considered Russian prices more workable in this shipping cycle and Russian suppliers were able to supply significant volume to South Korea. But imports from Russia in January-August fell by around a quarter to 394,494t from 521,894t in the same period last year.

Scrap imports from Australia fell to just 620t in August, down from 32,268t in July, because south Asian and Indonesian buyers bid higher prices and were more attractive destinations for Australian sellers. Buyers in these regions continued to register strong scrap demand and found Australian scrap prices more competitive than Japanese scrap.

South Korea imported 19,305t of scrap from other origins, up by 7.8pc on the month. But the January-August imports from other origins more than halved on the year to 181,023t from 410,818t in the same period in 2019.

South Korean domestic scrap suppliers were reluctant to send scrap to mills in July-August as mills lowered collection prices further. Mills' inventory level consequently fell and they were driven to seek more scrap on the seaborne market, which will be likely to drive up South Korea ferrous scrap imports over the next two months.

By Terry Chuay