China looks to US for next scrap cargoes amid resumption of imports

US steel scrap sellers have been locked in negotiations for sales to China this week amid a continued drop in global prices, industry sources told Fastmarkets.

At least three major scrapyards in the US have been offering bulk shredded and plate & structural (P&S) scrap to China in the spot market this week, sources said.

A US trading source told Fastmarkets that Chinese traders have been asking for offers for bulk cargoes from the US West Coast this week, in particular for shredded and bonus grade material.

The new developments mean that scrap trade flows from the US to China are resuming, following smaller bulk cargoes of P&S scrap sold from Japan to China in early January.

Traders said a transaction involving shredded scrap in a deep-sea cargo from the US West Coast was heard sold at $430 per tonne cfr China on Tuesday January 26. But this could not be directly verified with parties involved in the deal at the time of publishing.

Market sources in China said any such shipment would likely be at least 30,000 tonnes and above.

“The transaction price is good for sellers, but bad for buyers due to the current price downtrend,” a buyer source in Southeast Asia said.

Prices become more appealing for China
The renewed interest in import cargoes by Chinese buyers, mostly heard to be major state-owned steel mills supporting the central government’s push to use more ferrous scrap in steelmaking, follows price falls in international scrap markets.

International scrap prices have become much more attractive for Chinese buyers in recent weeks with key buyers elsewhere in Asia cutting bid prices furiously.

Fastmarkets’ price assessment for steel scrap heavy scrap domestic, delivered mill China was 3,230-3,250 yuan ($499-502) per tonne on Friday January 22, widening upward by 10 yuan per tonne week on week.

In contrast, the price assessment for steel scrap HMS 1&2 (80:20), cfr Vietnam, which is typically based on prices from the US and Australia, was $435-440 per tonne cfr on January 22, down by $38-40 per tonne week on week.

Downtrend in Asian markets continues
Sellers have been indicating to traders that they are willing to strike a deal at $430 per tonne cfr Vietnam on a HMS 1&2 (80:20) basis this week, down from $450 per tonne cfr last week.

But buyers in South Korea were only willing to consider prices of $415 per tonne cfr for HMS 1&2 (80:20) by January 22, following a slump in Japanese prices last week.

A buyer in South Korea was heard to have purchased 10,000 tonnes of H2 scrap in a tender at ¥36,480 ($352) per tonne fob Japan on Tuesday, which was more than ¥3,000 per tonne lower than the previous Korean bid for similar material.

In Taiwan, a major steel mill has cut domestic scrap purchase prices by NT$1,000 ($35.70) per tonne this week, while major Japanese mini-mill Tokyo Steel slashed its prices twice this week after cutting prices three times earlier in January.

“Given the tremendous increase in prices seen in December, it’s likely that prices will fall further,” a Taiwanese buyer source told Fastmarkets on Tuesday.

Vietnamese buyers said they received offers as low as $400 per tonne cfr Vietnam for bulk Japanese H2 and at $420 per tonne cfr Vietnam for bulk Japanese HS from traders by Wednesday morning.

This is a fall of $15-20 per tonne from Tuesday, when offers for H2 were heard at $415-420 per tonne cfr Vietnam.

Market sources expect China’s looming presence in the ferrous scrap market to continue supporting scrap demand, especially with imports in the region growing year on year in 2020.

Additional reporting by Jessica Zong in Shanghai.

Explore the six macro-economic and steel-specific dynamics set to rebalance the Asia steel and scrap market in 2021. Please read our full report Asia Steel and Scrap: Six Key Forces in 2021 today.

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