Ferrous Scrap Price could Hit Bottom in Osaka

Ferrous scrap market shows sign to hit bottom around Osaka after the continuous drop. Local makers pay 38,000-39,000 yen per tonne for H2 grade, which decreased by 1,750 yen or 5% from recent peak. The dealers see the supply is tight for heavy grade scrap especially for H2 grade due to 5,000 tonnes of export shipping from November 28 to December 1. With the tighter supply, local dealers expect the market could hit bottom. Kyoei Steel announced 20% output reduction and Kishiwada Steel reduces the output by 15% in November and December from a year earlier when the building demand is very slow due to transition process for new building standard law. With the lower consumption, the scrap market decreased along with lower scrap export price. More supply from other areas pressured on the relative high local market while scrap generation around Osaka was low level. Japanese largest electric furnace steel maker, Tokyo Steel Manufacturing reduced the scrap purchase price by 4,500-5,500 yen per tonne at the plants compared with the peak level. The price decreased to 38,000 yen per tonne for H2 grade with land transport and to 38,500 yen for ocean transport at Okayama plant. Hyundai Steel of South Korea reduced the offer to Japanese scrap for 3 weeks in a row. The offer is FOB 35,500 yen per tonne for H2 grade, which is 4,000 yen or 10% lower than the peak. The 2 major Asian steel makers now try to find the scrap market trend after the aggressive decrease. Steel makers in China and Taiwan started to purchase Japanese scrap while scrap dealers will ship scrap from Tokyo bay at higher price than purchase price by local steel makers. With the changed mood, Osaka’s scrap market also tries to find bottom level. A dealer source said steel makers will increase scrap purchase volume to build scrap inventory toward year end and new year holiday. However, some interests are still cautious for the positive view when very slow building demand could keep the low level consumption.