Scrap prices rose in China while stabilising in Southeast Asia

Scrap prices rose m/m in South Korea and China due to mills’ restocking purchase while these stayed unchanged in Southeast Asia and Japan because of slow market activity.

Chinese scrap prices rose to RMB3,060 /t in early January, recording a 150 /t m/m growth. This was mainly due to mills’ winter restocking purchase for scrap as reflected by rising scrap inventories at mills.

Scrap processing and collection will start halting since late January, ahead of the Chinese Lunar New Year during 9-17 February. Therefore, more mills started their winter restocking purchase for scrap since mid-December. In the meantime, although BF-BOFs cut their output due to poor margins, they managed to raise scrap consumption considering its cost competitiveness against hot metal cost. EAFs, sitting on a positive profit, also kept high-capacity utilisation rate, resulting in growing scrap consumption as well (see chart). Scrap purchase was strong, but scrap supply was hampered by snowy weather and cooling temperature. Mills had to keep raising its bids to attract more scrap supply. Consequently, it resulted a RMB150 /t m/m increase in scrap prices.

Similar restocking purchase also led South Korean mills to lift bids for Japanese scrap in the second half of December, due to a quick drawdown of scrap inventories. This resulted in an increase in domestic scrap prices. Japanese scrap export offers edged higher by $5-10 /t m/m. While higher due to an appreciation of JPY against USD, scrap offers have not increased much on a FOB basis. Currency fluctuations have added more uncertainty to export negotiations. Domestic scrap prices in Japan have remained largely stable as the market entered a lull approaching a holiday maintenance period. A major EAF producer has not revised purchasing prices after an increase in early-December.

Southeast Asia scrap prices also stayed unchanged m/m as mills were also staring at upcoming Tet holidays in Vietnam during the week of the Chinese Lunar New Year holidays. That also reduces the demand for scrap. Meanwhile, due to rising finished steel inventory, mills were reluctant to raise their scrap bids despite low scrap inventory. For steel longs products, although mills tried hard to increase steel prices, sales volume remained low. This further made mills cautious of scrap procurement at current prices. 

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