High prices impede Japanese ferrous scrap exports

Japan's ferrous scrap exports fell to a five-year low in January, mainly due to rising prices fuelled by Japanese domestic scrap demand.

January export declined by 33pc on the month and by 23.5pc on the year to 501,000t, Japan customs data showed.

Cargoes that were shipped out in January were mainly booked between late November and the end of December. During this period, Japanese mills aggressively lifted collection prices and this bolstered export prices. Tokyo Steel's Utsunomiya plant collection price rose by ¥15,500/t ($145/t) between late November to the end of December while the Argus H2 fob Japan assessment rose by ¥11,000t ($103/t) during the period.

Many overseas buyers stepped back from the seaborne scrap market as they were concerned that the downstream market might not be strong enough to support high scrap prices. Exports to all major destinations, except Taiwan, registered a sharp decrease. Taiwanese buyers were purchasing more Japanese scrap, with US scrap prices also in an upward trend and availability heavily impacted by shortage of containers.

Vietnam and South Korea remained the top buyers of Japanese scrap, though volumes declined by a third from December levels. Under pressure from unaffordable imported ferrous scrap prices and slow domestic finished product sales, Vietnamese and South Korean steelmakers focused on domestic scrap collection with domestic prices rising gradually.

In January, Japan shipped two vessels of ferrous scrap to China after the country re-opened to ferrous scrap imports this year, following a 2018 ban. The total export volume in January was 5,985t, according to Japanese customs data. Enquiries from Chinese buyers picked up following successful customs clearance for the first two cargoes and with Chinese domestic steel markets firming up after the lunar new year holiday. Japanese traders expect export volumes to China to edge up in the next few months, though the volume may not be as much as expected with Chinese mills only buying trial cargoes given persistent customs clearance and policy risks. Risks pertaining to cargo clearance by Chinese authorities were also echoed by other suppliers.