Scrap prices stayed subdued across Asia on weak restocking

Written by Puneet Paliwal

Scrap prices were flat-to-down m/m across major Asian consuming markets as buyers resisted fresh purchases ahead of holidays in China and Southeast Asia as well as on weak demand stemming from reduced steel mill utilisation rates.

In China, scrap price decreased by RMB60/tm/m in early February due to weak demand as most mills had finished their winter restocking. Meanwhile, scrap consumption weakened as overall EAF capacity utilisation rate dropped sharply from 63% in early January to 35% in early February due to reduced labour availability and elevated steel inventories (see chart), and Insight.

Moreover, the underlying demand for steel in this market weakened closer to the Lunar New Year holidays, despite fresh rumors of government considering new debt issuance of RMB 1 trillion under a special sovereign bond and a 50-basis point cut announced in Required Reserve Ratio by Public Bank of China on 24 January. Therefore, after finishing the winter restocking, mills lowered their scrap bids and some mills decided to halt scrap purchase during the holiday period.

Much like China, scrap consumption dropped in Southeast Asia ahead of holiday season, as finished steel inventories stayed elevated. Scrap prices have thus stayed unchanged. In Japan, on the other hand, recent depreciation of yen had an unusual effect on their scrap export prices, which rose in yen terms but dropped by $5–10/t in USD terms. Key development from this market was that the winning price of the monthly Kanto Tetsugen scrap tender was higher than market expectations, possibly owing to yen depreciation. Domestic EAF based mills had lifted scrap purchasing prices in mid-January, but these remained stable at those levels into February. Overall scrap demand is limited in Japan, while supply is more constrained in Kansai market than in Kanto market, which led to widening of scrap price differential between these markets in February.

In Bangladesh, steelmakers were able to negotiate lower prices of imported scrap at the start of February, down $10/t m/m for HMS 80:20. This was primarily due to low price competition in the seaborne market by Indian and Turkish buyers. Liquidity conditions have improved in the country after the formation of new government in recent elections. Simultaneously, construction demand is on the rise and steel mills are operating at higher run rates, consuming more scrap.

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