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

South Korean steel mills have reduced ferrous scrap imports and some mills plan to halt purchases for the next couple of months, said sources to Davis Index. Sales of finished flat steel and special high-grade steel have dropped in South Korea with the spread of COVID-19 in the country. 


Leading integrated steelmaker Posco is likely to halt its ferrous and stainless-steel purchases at Gwangyang Works and Pohang Works from both the domestic and imported markets for an indefinite period, said sources. Subdued finish steel demand and weak special steel sales have lead to this decision, which has further pulled down ferrous scrap prices in South Korea. Posco’s overall performance in 2019 remained below expectations despite its focus on cost-cutting and technical innovations. 


Hyundai Steel is likely to follow suit and scale down scrap purchases, if the situation doesn’t improve in the coming days. The company’s electric arc furnace at Dangjin could operate at lower capacity. 


South Korean scrap market

Since the beginning of the year, import of high-grade scrap from Japan has significantly dipped due to lower consumption by Korean automakers. South Korea produced 11.16mn mt steel in the first two months of 2020, down 3.1pc from a year ago, according to Korea Iron and Steel Association (KOSA). 


Despite a recent rise in Turkish bulk scrap prices, South Korean ferrous scrap prices have failed to improve and have remained under pressure. The daily US-origin HMS 1&2 (80:20) index settled at $257.40/mt cfr Turkey on April 15, up $15/mt from a week ago. 


SeAH Steel mill reduced its purchasing price for domestic ferrous scrap by KRW10,000/mt, effective April 14. Daehan Steel, Dongkuk Steel and Korea Steel announced similar price cuts during the week. 


Steelmakers to cut production 

Lower steel demand due to COVID-19, higher competition in finish steel markets and costlier greenhouse gas emission rights have burdened Korean steel companies. Steel mills have requested the Korea government to provide some relief as they have spent a huge amount of money to buy emission rights this year. Higher production costs and weak steel demand would inevitably lead steel producers to scale down of productions in the coming days. 


Automakers halt production 

Kia Motors and Hyundai Motors in South Korea are mulling to suspend their operations at three domestic factories. The spread of the virus has impacted Korean automakers exports to Europe and the United States. Hyundai Motor has halted a line producing its Tucson sport utility vehicle in Ulsan from April 13-17. After closing facilities outside South Korea, automakers may also shut domestic facilities. 

South Korea’s exports of vehicles and vehicle components during the first 10 days of April tumbled 7.1pc and 31.8pc from the prior period (March 1-10), according to customs data.

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