Asian Scrap Markets Update

Written by Damon Sun

The following article on the Asian ferrous scrap markets was written by contributing writer, Damon Sun of Daido International:

Over the past 3 weeks, there has been an uptick on prices of HMS (heavy melt scrap) containerized from a low of $165/metric ton CFR to this Monday at $185/metric ton CFR basis Taiwan.

In the last 3 days, Tokyo Steel in Japan has dropped average 2000 Yen (daily drop 500 Yen, 500 Yen, 1000 Yen) or about $15/mt.  While Taiwan import containerized dropped on Tuesday to $183, Wed ($180) and Thursday to ($178).  Total drop this week $7/mt from the high point reached just this Monday.

The previous uptrend was due to some Korea scrap restocking and a major typhoon In Taiwan was a psychological catalyst for rebar re-stocking and anticipation of resumption of third shift operations after summer electricity curtailments.

As Chinese mills resume operations from the shutdown due to China WW2 celebration parade, the stock market and subsequent Yuan devaluations, Chinese small square billets are being re-offered into the markets down $10-$15 from previous quotes prior to the Chinese celebration.  Quotes into Far East and SE Asia are in the $295/mt CFR range. Generally speaking, conversion from scrap to billet should be about $120/mt. It means that scrap should still fall slightly from current levels.

I’d like to point out that I have been hearing numerous production issues using the imported Chinese billets. Main issues involve the chemistry of the billets are too hard (brittle) and snapping issues either in the drawing process and/or the final rebar product snapping while trying to bend. The Chinese billets are often marketed by traders and, for example, a 3-5,000 MT lots may involve sourcing from 2-3 mills. It is also possible there is a mixture of rejected billets with prime billets. My summary is that the imports of Chinese billets is not a “home run” for re-rolling purposes.

Iron ore has been remarkably stable during this period.  

Heading into this El Nino winter, I do still expect scrap collections to be an issue. However, these Chinese billets being shipped worldwide will be the main psychological focus on pricing for at least another year.

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