Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

The winning bid average at Japan’s monthly scrap export tender Kanto Tetsugen, Thursday, rose to JPY38,710/mt ($370.8/mt) fas Tokyo bay, up JPY8,105/mt or $77/mt from JPY30,605/mt ($291/mt) fas Tokyo bay in November. The tender sold a total of 12,000mt of ferrous scrap, #2 HMS for deliveries scheduled latest by January.


Bids hit a 12-year high on Thursday, scaling levels reached during the 2008 crisis. Short supply of Japanese ferrous scrap and bullish international markets are likely to maintain the uptrend in December. 


At the Kanto tender, the first winning bid was at JPY38,710/mt ($371/mt) fas Japan for 6,000mt #2 HMS, while the second winning bid was at JPY38,510/mt fas Japan for rest 6,000mt scrap. The first winning bid was higher by JPY7,993/mt ($76.53/mt) from November. There were 18 bids for 147,500mt scrap.


Market participants had expected prices to rise sharply but most projected it to be around JPY38,000/mt, JPY1,000/mt lower than the actual winning bids. This will lift Japanese scrap prices further, opined traders. Supplies remain scarce, globally, amid an auto sector revival in East and Southeast Asia, which is driving demand for high-grade scrap.


On the fob Japan basis, the average of bids for #2 HMS is around JPY39,000-39,500/mt ($374-378/mt) fob, higher by JPY2,500-3,000/mt than the current market levels. On the back of these results, traders expect export prices to surge immediately. Domestic scrap prices in Japan are also sensitive to rising demand and competition from buyers in importing countries.  


East Asian market has resumed trades for imported scrap amid strong demand for billets in China. A possibility of resumption of ferrous scrap imports into China from early 2021 has encouraged few Japanese traders to restock scrap before they face a supply crunch. Chinese buyers could imports 10mn mt ferrous scrap, annually, according to industry experts.  


In the domestic market, Tokyo Steel has announced the fifth price hikes in December. In the last revision, effective Dec 11, the steelmaker lifted ferrous scrap purchase prices by JPY1,500/mt ($13/mt) at Tahara and Utsunomiya plant. Prices rose by JPY1,000/mt at other three works. New H2 price at JPY37,500/mt ($359/mt) del Tahara and JPY35,500/mt del Okayama.


Demand from the construction and auto sectors is recovering in Japan. Mills are ramping up production to cater to this demand but are struggling to maintain their profitability amid a sharp rise in ferrous scrap prices. Also, the Japanese yen has appreciated against the US dollar to JPY104.4 on Dec 10 as against 105.5 a month earlier. Suppliers might focus on the domestic market as export realisations lower with the appreciation of yen.  




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