Japanese Scrap Consumption Exceeds 15% of Converter Steel Output in February

Japanese integrated steel makers are increasing ferrous scrap consumptions along their production recovery. Japanese ferrous scrap consumption rate was 15% of converter steel output in February, up by 0.3 percentage points from January. The rate reached 15% for the first time since October 2008. The consumption volume was 1.095 million tonnes in February. Integrated steels continued to consume ferrous scrap at high volume in March. Nippon Steel has reduced scrap procurement since late March due to an operation trouble of no.2 blast furnace in Oita Iron Works while JFE Steel’s West Japan Iron Works has increased the purchasing volume.

Japanese integrated steels pay near 45,000 yen per tonne for high grade scrap currently. Japanese scrap export price is surging to around FOB 43,000 yen for South Korea. A large scrap dealer said domestic electric furnaces would become unable to secure enough scrap and price gap might widen between H2 and other grade scrap.

Japanese ferrous scrap export increased by 38% to 845,000 tonnes in February from January, according to Ministry of Finance. The export volume rebounded after 2 months and exceeded 800,000 tonnes for the first time since July 2009. The export increased by 50.1% to 542,000 tonnes for South Korea, by 2.5% to 247,000 tonnes for China and by 512.5% to 49,000 tonnes for Taiwan. The export to South Korea increased for 3 consecutive months while the export rebounded after 2 months for China and Taiwan.

Scrap dealers around Tokyo purchase H2 at around 32,500 yen per tonne, H1 at around 34,300 yen and HS at around 36,000 yen. Local electric furnace steel makers pay 38,000-38,500 yen for H2 and some pays as high as 39,000 yen. Some makers reduced the purchase volume last week. However, a dealer source said ferrous scrap isn’t excess due to low generation volume and small dealers’ continuous shipment to scrap exporters at Tokyo Bay.

In Osaka region, ferrous scrap market price is strong at around 30,000 yen for H2. Local electric furnaces purchase H2 at around 38,000-39,000 yen. New export contract price of H2 is FOB 39,000-40,000 yen per tonne for East Asia. Scrap delivery volume is said to be increasing to South Korean steel makers. A large dealer source said Hyundai Steel is cautious to contract new import contracts when ferrous scrap arrives at above 20,000 tonnes per day presently.