Steel scrap prices up 80% amidst drop in domestic demand, says Japan

By Anil Mathews

TOKYO (Scrap Monster): The domestic demand for scrap remained weak over the past one year. However, prices surged higher by over 80% during this period. The prices hit the highest level in two years. The year-end scrap prices stood at Yen 27,500 per ton ($241 per ton). The sharp rise in price was mainly on account of strong overseas demand and weakness in Japanese currency.

The oversupply by China had kept the scrap prices under check through the spring of 2016. However, the bottoming out of steel market in the fall led to sharp rebound in scrap market. The high prices for Chinese semi-finished billets forced EAF steelmakers in Southeast Asian region to look for alternative sources. The weakness in yen boosted imports of Japanese scrap by steelmakers in other Asian regions including Vietnam and South Korea.

The sharp rise in coking coal prices also lifted the demand for scrap by blast furnace steelmakers. The reduction in usage of coal boosted the scrap usage in October last year to the highest in over 2 years. The total consumption of scrap by blast furnaces totaled around 900,000 tons during the month alone. Meantime, the scrap inventories left with EAF steelmakers dropped significantly to around 120,000 tons at the end of 2016, falling below the desirable level of 150,000 tons. The scrap suppliers are seen holding on their stocks and unwilling to supply scrap to steel makers, in anticipation of further rise in prices. When matched with overseas prices, Japanese domestic scrap continues to remain inexpensive. As a result, the traders do not expect a major decline in scrap prices. A sideways to upward movement could happen in the near term, noted steel scrap traders in the country. The firmness in Chinese billet prices may also lend support to Japanese scrap prices, they noted.

The trade statistics released by the Japanese Ministry of Economy, Trade and Industry (METI) suggests that carbon scrap stocks totaled 2.3 million tons, falling by nearly 5% over the previous month. The stocks were down by 4.6% over the previous year. The purchases totaled 2.04 million tons, marginally higher by 1.6% year-on-year. Out of this, carbon scrap purchases totaled 1.9 million tons. The purchases of alloy scrap totaled 93,000 tons, whereas those of scrap totaled 46,000 tons.

The Japanese stainless steel scrap exports totaled 14,824 tons during Nov ’16, significantly higher by 9% when matched with the month before. The country had exported 13,600 tons of stainless steel scrap during October last year. The largest importer of stainless steel scrap from Japan was South Korea. The exports to Korea totaled 8,151 tons, accounting for nearly 55% of the total exports out of the country. The exports to Korea were down by 17.5% when compared with the prior month.

Japan imported 7,460 tons of stainless steel scrap during November last year. The exports dropped by nearly 10% when compared with the prior month. The country’s stainless steel scrap imports had totaled 8,290 tons in October 2015. The largest supplier of stainless steel scrap during the month was South Korea. The imports from Korea dropped by one-fifth to total 3,502 tons.