Japanese scrap exports surge in 2020

Japan's ferrous scrap exports rose to an 11-year high in 2020 as Covid-19-related mill shutdowns freed up supplies ahead of a second-half global rebound in demand.

Exports rose by 23pc to 9.39mn t, the highest since 2010. December exports accelerated by 8.5pc to 747,220t from November but were 2.2pc lower than December 2019, Japan customs data showed.

The surge in shipments by Asia's biggest scrap exporter fed growing demand in Vietnam and Bangladesh that added new steel capacity.

Vietnam passed South Korea as the top destination, ending South Korea's 10-year run as Japan's biggest buyer. South Korea's domestic market saw weaker demand and rising self-sufficiency in ferrous scrap.

The other major shift in the market was Japan capturing market share from the US into Taiwan. US supplies tightened during pandemic lockdowns and was one factor adding price support to seaborne markets into late 2020.

The Argus H2 fob Japan assessment rose from early November by ¥14,900/t ($142/t), or 52pc, to ¥43,500/t at end of 2020 as strong domestic scrap demand in Japan added to seaborne market strength. The price has followed weakness in ferrous markets lower in early 2021. The H2 index fell by 20pc to ¥34,500/t in January.

Japanese steel mill shutdowns during lockdowns in the first half of the year freed up scrap supplies for export. Japan's crude production dropped sharply from March and reached a floor in June, down by 36pc from a year earlier. Scrap suppliers shifted attention to exports and offered with aggressive prices to lighten pressure on domestic sales.

Japanese scrap suppliers this year are more optimistic about export demand after China reopened its door to ferrous scrap imports. The imports are still in the early stages with many details to be clarified before its imports grow to significant quantity. But the potential buying power of China could act as a cushion to prevent Japanese scrap prices from falling significantly in 2021.