Asia braces itself for higher scrap prices on new US steel tariff

The United States’ new blanket tariff on steel imports boosted import prices for containerized scrap in Taiwan this week, leaving market participants in the wider Asia region bracing themselves for the reality of having to pay more for the steelmaking raw material.

US President Donald Trump signed off on the 25% tariff on steel imports proposed by the country’s Department of Commerce on Thursday March 8, officially making it trade policy.

This follows a year-long Section 232 probe on whether such imports posed a national security risk.

Against this background, sellers of US-origin ferrous scrap have taken the chance to raise their offers this week, riding on the bullish sentiment in the US market.

“US recyclers have increased offers to Asia this week after domestic steel prices in the US increased,” a Taiwanese trader said.

By Friday March 9, offers for containerized heavy melting scrap (HMS) into Taiwan had increased to $365-370 per tonne cfr, compared with $353-356 per tonne cfr earlier this week.

Buyers, who scrambled to snap up cargoes before further price increases, made bookings at $360-365 per tonne cfr this week. Among them was a major electric-arc furnace mill that bought 4,000-5,000 tonnes of imported scrap.

These transactions sent Metal Bulletin’s assessment of import prices for US-origin HMS 1&2 (80:20) into Taiwan for the week to Friday to the same level of $360-365 per tonne cfr, up $10-15 per tonne from a week earlier.

Sources said supply had tightened because US recyclers were “not letting volumes go easily.”

“Ferrous scrap suppliers are limiting their supply for the containerized markets and are betting that they can sell higher in the coming weeks,” a second Taiwanese trader said.

The uptrend is expected to continue until the bullish sentiment in the market dissipates once prices get too high, sources said.

“More price increases should come until end-users start looking for alternative sources from Japan, Hong Kong and China and start staying away from US-origin scrap,” a major Taiwanese end-user source said.

The US was the largest source of ferrous scrap to Taiwan in 2017, accounting for 1.22 million tonnes. This compares with 400,939 tonnes from Japan, 316,561 tonnes from China and 139,369 tonnes from Hong Kong.

The short-term bullish sentiment has spread to Vietnam, also a key scrap import market. Market participants there say this is the start of a constant upward trend in prices.

“Both domestic and import prices of ferrous scrap have increased continually this week, with mills increasing their bids for containerized US-origin cargoes,” a Vietnamese trader said.

However, this does not mean that the supply of ferrous scrap for Vietnam would be limited in the long-term.

“Ferrous scrap supply from the US west coast will continue to head to Asia because there are high costs involved for moving scrap to domestic markets using railroads,” a trader in Vietnam with close knowledge of the US scrap market said.

Vietnam will also continue to have Japan as its prime source of scrap due to shorter shipping times and the availability of bulk-shipment cargoes.

“Many big mills in Vietnam prefer Japan-origin scrap as they can get it quickly within four weeks and in bulk shipments,” the first Vietnamese trader said.

Meet Metal Bulletin’s Asia steel editor, Paul Lim, and China steel analysts Jessica Zong and Gladdy Chu at the 16th International Steel Market & Trade Conference in Xi’an, China, on March 29-30. Paul will be presenting on “Increasing trading margins and reducing spot price risks in volatile global markets” at the conference. Connect with us on WeChat using the ID: metalbulletin.