Japanese EAF mills forced to raise scrap prices despite static steel markets

Japanese steel producers which use electric-arc furnaces (EAFs) are being forced into raising their purchasing prices for ferrous scrap feedstock despite there being no upward movement in their steel sales prices, sources in Japan have told Fastmarkets.

On Tuesday May 26, key EAF mill Tokyo Steel raised its bid price for steel scrap by ¥500 ($5) per tonne at all its steelworks except in Tahara, where it raised bids by ¥1,000 per tonne. The firm is now bidding for H2 scrap at ¥19,500 ($181) per tonne for its Utsunomiya works.

These increases followed similar bid price rises of ¥1,000 per tonne across all the mill’s units on Thursday of last week. The double rise followed 15 separate price decrease announcements by the firm over a period of less than three months.

Japanese domestic rebar prices averaged ¥62,800 per tonne ex-works in April, according to the Japan Iron & Steel Association, the lowest average since November 2017. Japanese manufacturing output fell by 5.2% year-on-year in March, while motor vehicle output fell by 9.1% on the same basis.

Although faced by sluggish steel demand, Japanese mills must pay more for scrap because they face competition from higher-priced export rates, sources said.

“I think domestic steelmakers have to increase their price, especially those near to the export docks,” a Japanese steel producer source said.

Japan export scrap prices have risen over recent weeks due to lower collection levels and strong demand from buyers in Taiwan and Vietnam.

Fastmarkets’ price assessment for steel scrap H2, export, fob main port Japan, was ¥22,500-23,000 per tonne on May 20, the highest level since March 4. Offer prices for similar material had moved up to ¥24,000-25,000 per tonne fob by May 26.

A Japanese exporter said that scrap suppliers have a mixed view on the future direction of prices, and that exporters were keeping a close eye on the movements in steel mill buying prices.

Japan officially exited from its state of emergency on May 25 following a decline in the numbers of new Covid-19 infections.

The measure began on April 7 but, unlike in many other countries which imposed similar initatives, the measure was only voluntary because Japan’s executive lacks the authority to impose a lockdown.

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