Japanese BF restarts to raise high-grade steel scrap use

Consumption of Japanese high-grade steel scrap will continue to increase in the coming months following the reboot of several blast furnaces (BFs) which were idled earlier in the year, market participants told Fastmarkets.

Higher steel demand in Japan, particularly from the automotive sector, has helped Japanese steelmakers raise production in recent months after a bruising start to the year characterized by price cuts, production drops and idled furnaces.

Japan’s largest steelmaker, Nippon Steel, announced late last week that it would restart its BF No1 in Kashima by late January following restarts at its BFs in Kimitsu and Muroran during November. Fellow steelmaker JFE opted to resume output of its BF No4 in Fukuyama in September.

Nippon banked the BF No1 in Kashima back in April amid poor steel demand exacerbated by the Covid-19 outbreak. BF No2 in Kimitsu was halted in mid-May, while BF No2 in Muroran was entered into maintenance on July 8.

Consumption rising
Market participants expect the new furnace reboots will further increase demand for higher grades of steel scrap in Japan.

“Nippon Steel will resume steelmaking at their idled plants soon - the steelmaking plans that are still in operation have been supplying semi-finished products to the idled plants, which are busy doing re-rolling,” a Japanese scrapyard source said.

“I think Japanese BF mills will keep buying scrap because the iron ore price is continuing to increase,” he added.

A Japanese scrap trader predicted that demand and prices for the high-grade plate and structural (P&S) and Shindachi busheling scrap will continue to rise in the country following the dramatic increase in December’s Kanto Tetsugen.

Steel scrap auctions by the Kanto Tetsugen - a co-operative of scrap dealers in the Tokyo region - closed at an average price of ¥38,710 ($371) per tonne fas on Thursday December 10, up sharply from an average of ¥30,605 per tonne fas in November.

High-grade premiums up
Japanese crude steel output was 7.2 million tonnes in October, up sharply from September’s 6.48 million tonnes, though production in the first 10 months of 2020 was down 11.7% year on year, according to the World Steel Association.

Higher steel output in recent months has raised demand for higher grades of steel scrap in Japan recently, with P&S material seen as the scrap of choice for such furnaces.

Fastmarkets’ price assessment for steel scrap, P&S export, fob main port Japan was ¥39,500-41,000 per tonne on Wednesday December 9, up from ¥38,000 per tonne one week before.

The price closed at a premium of ¥3,500 per tonne above the H2 price of ¥36,000-37,500 on the same day.

In the first two weeks of December, the P&S-H2 premium averaged ¥3,875 per tonne, which is the highest in the year to date and up from November’s ¥3,500 per tonne average, which was itself a year-high last month.

Chinese influence
Market participants also believe prices for Japanese high-grade steel scrap will be boosted next year by the relaxing of Chinese steel scrap import rules.

Although China’s customs department has yet to make a final decision and official declaration regarding the relaxation of imports, market participants in Japan have been holding exploratory discussions with Chinese traders and mills about deals for scrap for months, Fastmarkets understands.

Japanese steel scrap traders are confident China will restart importing considerable volumes of steel scrap from 2021, with the high-grade Shindachi busheling and P&S top of their shopping list due to their high-yield properties.

Some Chinese companies have even opted to take over Japanese scrapyards to secure supplies of scrap for when import regulations allow material to start flowing into China.

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