Bangladesh bulk scrap buying halted by bloated stocks, higher Japan export scrap prices

Bulk scrap purchasing in the Bangladesh import market is under pressure, largely due to inflated inventories of material and high offer prices, market sources told Fastmarkets on January 10.

“In the past three to four months, when nobody else in the Indian subcontinent was buying much, Bangladesh bought. But now, after this purchasing, everyone has high stocks on hand,” one mill source in the country said.

“December had the highest number of bulk vessels carrying scrap arriving in Bangladesh ever,” one South Asian trader source told Fastmarkets. “So mills are covered for material now, but will have to come back soon – they are waiting for the right time.”

Current bulk scrap prices are also a key deterrent for consumers, with offers from the United States West Coast heard at $330-335 per tonne cfr Chittagong for HMS 1&2 (80:20) on Friday, while bids for such material were heard no higher than $320 per tonne cfr.

While the US steel scrap HMS 1&2 (80:20), export index, fob Los Angeles, rose by $41 per tonne between early October 2019 and early January 2020, Bangladesh local rebar prices have stayed flat over the same period, thus squeezing steelmaking margins, the mill source said.

With bulk export prices from Japan also uncompetitive following price rises in the Kanto Tetsungen tender, Bangladesh’s mills are concentrating on buying smaller-quantity loads in containers from origins such as South Africa and Australia, a second South Asian trader said.

Offer prices for HMS 1&2 (80:20) in containers from these origins were heard at around $305 per tonne cfr on Friday.

Buying containers also suits consumers at this time due to high stock levels, the mill source said.

Japanese influence in Bangladesh scrap buys
Japanese material has been increasingly appealing to Bangladeshi mills in recent months, with export prices from Japan regularly undercutting competitor offers from the EU and the US, the mill source said.

Bangladesh imported 259,353 tonnes of Japan-origin material in January-November 2019, according to statistics from Japan’s Finance Ministry, up by more than 200% compared with the full year of 2018.

This price advantage has added to the inherent logistical appeals to Bangladesh mills of purchasing Japanese material.

Japan’s closer proximity to Bangladesh than major bulk exporting rivals, and the country’s use of smaller-size vessels of around 10,000-15,000 tonnes’ capacity, means cargoes both arrive quicker and are easier to load and dock at Bangladesh’s Chittagong port, the first South Asian trader said.

With Japanese domestic scrap demand under pressure from sluggish steel sales, some market participants believe Japan will realize even higher export volumes to Bangladesh in 2020.

Fastmarkets is proposing to launch four fob Japan ferrous scrap prices for H2, shredded, Shindachi and plate & structural (P&S) scrap, as well as a cfr Vietnam price for Japan-origin H2 scrap in February 2020. Find out how to participate in the consultation by reading the pricing notice here.