TEX reported that prices of No2 HMS have further slid to the level of JPY 22,000 per tonne FOB in new deals of ferrous scrap exports from Japan to South Korea where purchasing intentions for import ferrous scrap are at a low ebb among local steelmakers.
A typical of flagged purchasing intentions among South Korean steelmakers is the case of Hyundai Steel Co. The company usually takes the largest amount of Japanese ferrous scrap among South Korea's buyers of import ferrous scrap.
Hyundai Steel bought No2 HMS from Japan at JPY 23,500 per tonne FOB in the first week of October 2012. But the company held back on any purchase of ferrous scrap from Japan last week. The company is poised to purchase Japanese ferrous scrap this week, but with intent to limit the purchase to a small quantity. The company describes the reason for a limited purchase this week as no pressing need for new supplies of Japanese material considering the present state of ferrous scrap stocks at the company's works.
On the other hand, many of Japan's ferrous scrap suppliers concentrated on negotiations last week for new deals of exports to China and Vietnam as they had seen the prospects of higher sales prices by JPY 500 per tonne or over than the terms of exports to South Korea. Few of the Japanese suppliers, though, expect Chinese deals to continue active for the present. Therefore, the Japanese suppliers as a whole would have no option but to depend on South Korea again for a principal export destination when the Chinese deals have taken their course, market sources believe.
Among South Korean steelmakers, Daehan Steel Mill Co negotiated its purchase of No2 HMS from Japan last week at JPY 22,500 per tonne FOB. Then, Japan's Tokyo Steel Mfg Co reduced what it pays for locally available ferrous scrap by JPY 500 per tonne for all grades from October 13th 2012. With Tokyo Steel's purchase price reduction of local ferrous scrap, the South Korean steelmakers have held down the target price from JPY 22,500 per tonne FOB to JPY 22,000 per tonne FOB for new purchases of No2 HMS from Japan. As a result, the Japanese ferrous scrap suppliers admit that it has become difficult to sell No2 HMS for export anew at JPY 22,500 per tonne FOB.
Some of the South Korean steelmakers have requested the Japanese ferrous scrap suppliers to delay deliveries until November 30th 2012 or later under the existing contracts for October 2012 shipment. Their explanation goes to the effect that their works have no room to stock ferrous scrap cargoes from Japan due to favorable arrivals of domestic ferrous scrap. Accordingly, the Japanese suppliers are hinting that they may have little opportunity to negotiate new deals of exports to South Korea for November to December 2012 shipment. Besides, there is a possibility that a buyer's market will continue for still more time in ferrous scrap exports out of Japan to the rest of East Asia, market observers believe.
Meanwhile, transaction prices are on the downside in new Japanese exports to South Korea of high grade ferrous scrap as well. Cases in point are Shindachi and P&S steel scrap, two high grades.
Prices of Shindachi under negotiation have come down to the range of JPY 25,500 to JPY 26,000 per tonne FOB this week from the level of JPY 26,500 per tonne FOB last week. In the background, buyers of Shindachi are decreasing in number in the repercussions of slack steel market conditions and the ensuing production cutbacks at domestic steel mills in South Korea.
Negotiated prices of P&S steel scrap stood at the level of JPY 27,700 per tonne C&F last week that translated into JPY 25,700 per tonne FOB. Until now, they are believed to have further declined by JPY 500 per tonne or so.
Source - TEX Report Limited
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