Asian ferrous scrap buyers target price cuts

Asia-Pacific ferrous scrap markets have weakened so far this year. Increased competition between seaborne ferrous scrap suppliers is encouraging buyers to aim for price cuts, as mills try to preserve margins in the face of weaker long product steel demand.

Two of the world largest exporters, Japan and the US, have more scrap to export. This is leading to strong competition between the two exporters for big buyers in Asia, and may put downward pressure on prices of global seaborne scrap in the near future.

The rise in supply comes as southeast Asian steel producers are not expecting to see any significant increase in domestic rebar demand before or after the lunar new year holidays in late January. The expectations of low demand are prompting mills to look to cut production costs.

Taiwanese mills are looking below the $255/t cfr Taiwan for US scrap, reflecting competitive offers from Japan. The last concluded deal price was at $260/t three days ago.

Prices of US scrap imports to Taiwan fell to a low for 2019 of $222/t on 4 October before peaking at $270/t on 18 December. Prices began to fall from $270/t cfr Taiwan on 6 January to $257/t on 16 January.

Japanese suppliers have lowered their offers for H1/H2 50:50 scrap to $267/t cfr Taiwan after the latest Kansai tender result. This is down by $18/t from the highest offer at $285/t in December last year. Japanese mill demand for scrap has started to slow down after Olympics-related demand ebbed, leaving dealers with excess scrap piling up in their yards.

Japanese suppliers are making more offers and have been more aggressive in prices since late December as they look to offload their scrap. The country's financial year concludes on 31 March, so export scrap prices are likely to remain weak as suppliers look to increase sales before then.

More competitive scrap offers from Japan have prevented US scrap exporters from raising their prices in Asia. Taiwanese mills have diverted their procurement towards Japanese scrap when prices are lower, which has curbed US scrap prices.

US scrap prices have started to slide, with the latest bulk price into Turkey reported by Argus at $288/t on 16 January. Prices have dropped by $9.30/t after holding unchanged from 9-15 January at $297.30/t. This may also encourage US suppliers to ramp up competition with Japanese scrap exporters to secure market share in Asia.

By Terry Chuay