Integrated Steels Material Policy Affects Japanese Ferrous Scrap Market Balance

Mr. Seiichi Hayashi, president of Ferrous Recycling Research, attended a forum of Japanese electric furnace steel makers and concerns held in Osaka, Japan on October 12 and overviewed supply and demand conditions of ferrous scrap in Japan and at overseas. Mr. Hayashi said Japanese ferrous scrap generation dropped by around 10 million tonnes in 2009 from 2008 while steel makers’ operations downed even more. As a result, Japanese ferrous scrap export hit record high to reflect wide gap between supply and demand. He suggested the export volume in 2009 was extraordinary and the export doesn’t grow to annual 10-12 million tonnes level.

Japanese ferrous scrap export totaled 9.4 million tonnes in 2009, 97% of which was to China, South Korea and Taiwan. Mr. Hayashi said Chinese importers seem to have purchased Japanese scrap aggressively because of cheap price and Chinese crude steel output didn’t increase as largely as scrap import expansion. Thus, he analyzed, China is not a stable importer of Japanese ferrous scrap. Meanwhile, South Korea increased import of Japanese ferrous scrap when Russia implemented export control in 2009. Mr. Hayashi said South Korean scrap import from Japan is estimated to total at around 7.3 million tonnes in 2010 despite of initial forecast at around 9.2 million tonnes. He explained South Korean steel makers are entering output reductions due to low demand for building materials.

Meanwhile, Mr. Hayashi pointed out Japanese integrated steel makers’ material policies have strong affects on domestic scrap supply and demand balance. He said integrated steels are expected to keep scrap procurement from domestic market for cost down, utilization of domestic resource and CO2 reduction. He forecasts Japanese integrated steels’ scrap purchasing would total approximately 3 million tonnes in 2010 when steel makers are recently decreasing outputs and their productive costs are lowering due to iron ore price down and strong yen rate.

Mr. Hayashi gave a personal view that Japanese forecasts ferrous scrap market price stays at around 30,000 yen per tonne in October. Japanese integrated steels are decreasing scrap procurement while Chinese and South Korean buyers are not active to purchase Japanese ferrous scrap. In addition, yen exchange rate maintains high.