S KOREA STEEL SCRAP: Buyers shun US offers, secure discount Japan cargoes

South Korean steelmakers were able to book bulk scrap cargoes from Japan over the past week at low prices although offers for US-origin deep-sea material continued to jump, sources have told Fastmarkets.

Three cargoes of Japanese H2-grade scrap have been bought by a South Korean steelmaker at ¥26,000 ($248) per tonne cfr over the past week, which would be equivalent to ¥24,000 per tonne fob, Fastmarkets heard on Thursday July 30.

This was despite Japanese exporters raising their offer prices to ¥27,500-28,000 per tonne cfr Korea, due to solid demand in Vietnam and Taiwan over the week.

Fastmarkets’ weekly price assessment for steel scrap H2, Japan origin import, cfr main port South Korea, was ¥26,000-26,500 per tonne on Thursday, widening upward from ¥26,000 per tonne last week.

South Korea was able to obtain lower prices for Japanese scrap than Vietnam because certain Japanese exporters only operate smaller vessels that can carry a few thousand tonnes of steel scrap, and are only of use on the short-sea voyage to South Korea – and in some cases, to Taiwan.

“Suppliers in Japan still want to sell at increased prices, but their offers are too high,” one South Korean mill source told Fastmarkets.

The stronger Japanese yen has raised US dollar-denominated prices over the past week, making Japanese scrap less competitive in markets such as Taiwan and Vietnam. But this has not affected trade to South Korea, because prices there are denominated in yen.

“The US dollar price is increasing but, from a suppliers’ viewpoint, that has not changed anything,” the mill source said.

With Japanese sellers reluctant to price themselves out of the market by raising their yen sales prices even higher at this stage, the mill source said that he thought the current situation could be a good time to buy Japanese scrap.

A second South Korean mill source said that the Korean local market has slowly started to improve, but that market conditions were unlikely to show significant improvement until the final quarter of 2020.

Deep-sea demand remains low
While deals for H2-grade material have still been possible at ¥26,000 per tonne cfr South Korea, despite the higher offer prices from Japan, the appetite for deep-sea cargoes has sunk over recent weeks.

With offers for deep-sea HMS 1&2 (80:20) from the US West Coast rising to $285 per tonne cfr Vietnam, and at $300-305 per tonne cfr Bangladesh, sellers would probably need to target $280 per tonne cfr South Korea for similar material. But West Coast sellers have abstained from making offers to Korea over the past week, sources said.

Mill sources told Fastmarkets that prices of $260-265 per tonne cfr South Korea for HMS 1&2 (80:20) may be workable, but this would be noticeably below sellers’ expectations.

Japanese exporters told Fastmarkets that prices of $270-275 per tonne cfr South Korea should also be possible for deep-sea deals, given the higher prices that Korea would now need to pay for any fresh Japanese cargoes.

Fastmarkets’ weekly price assessment for steel scrap, HMS 1&2 (80:20), deep-sea origin import, cfr South Korea, rose to $265-275 per tonne cfr on Thursday, up by $5 per tonne from $260-270 per tonne cfr last week.