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Asian markets started the week with a slump amid lower steel consumption and falling ferrous futures in China.
Market expectations of further price drops ahead of the Chinese New Year – observed in a week-long holiday from February 11 – led to buy-side bearishness across Asian markets, Fastmarkets heard.
This prompted sellers in the steel billet market, cfr Southeast Asia, to attempt offering more cargoes out to sell stock and cash in before prices fall further, but buyers have been cautious to make any bookings in a sharply dropping market.
“Prices will keep dropping over the next month until Chinese New Year,” a Japanese scrap trader said on Friday, adding that buyers from South Korea were waiting until prices bottom out before coming in for material.
“The price is now falling but we haven’t seen a lot of scrap rushing into our yards. A sharp drop in prices will just create a quick bottoming out. I believe the market will recover after the Chinese New Year,” a Japanese scrapyard source said.
“If you look at the $200 spread between Turkish [import] scrap prices and rebar [export] sales prices, there is possibly more room for scrap prices to fall,” a scrap trader in Singapore told Fastmarkets on January 21.
A second Singaporean trader said that price drops mean that cancellations from the buy side are now a large possibility.
“Vietnamese mills could cancel their higher-priced shipments. Some ports are congested and vessels are being delayed. That could be the buyer’s excuse. They could ask ‘do you want to extend the letter of credit? If so, give me a discount,’” he said.
High volumes of exports from Japanese ports such as Osaka have caused unusually high congestion in recent days, he said.
Key scrap markets The pivotal scrap export market of Japan experienced a sharp drop in its domestic and dockside scrap markets over the last week, with lower bids from a South Korean steelmaker dragging export prices down.
The South Korean mill purchased 45,000 tonnes of high-grade scrap, despite suppliers accepting more than 100,000 tonnes of bids. The mill’s omission of H2 purchasing placed more pressure on the lower-yield grade.
Fastmarkets’ price assessment for steel scrap H2, export, fob main port Japan was ¥39,500-42,000 ($382-406) per tonne on Wednesday January 20, down ¥2,000-3,500 per tonne from ¥43,000-44,000 per tonne fob one week before.
By Friday, a Japanese trading source said that the dockside price level had fallen to ¥37,000-38,000 per tonne fas Tokyo Bay for H2, with ¥1,500 per tonne added on to secure scrap on a ship to make an fob price.
Weak prices in Japan allowed Taiwanese buyers to have a crack at lower cost cargoes this week, with a deal for H1:H2 (50:50) heard at $410 per tonne cfr. Bids for the same grade were heard at $458-460 per tonne cfr just one week before.
Another key buyer of Japanese scrap – market participants in Vietnam – dropped buy prices amid lower offers from both Japan and the United States, sources said.
Offers for bulk cargoes of HMS 1&2 (80:20) from the US came in at $450 per tonne cfr Vietnam against bids of $400-410 per tonne cfr.
Fastmarkets’ weekly price assessment for deep-sea bulk cargoes of steel scrap, HMS 1&2 (80:20), cfr Vietnam was $435-440 per tonne on Friday, down by $38-40 per tonne week on week from $473-480 per tonne.
Bangladeshi steelmakers have been actively buying, at least five, bulk deep-sea cargoes since the start of the year and while relatively high sales prices supported bulk prices this week, containerized scrap prices have continued to drop.
Fastmarkets heard that HMS 1&2 (80:20) was offered at $415 per tonne cfr Bangladesh late on Thursday, with bids at only $400 per tonne cfr. That is compared with deals from the UK heard at $482-485 per tonne cfr during the previous week.