Japan Integrated Steels’ Scrap Use Keeps High in August

Japanese ferrous scrap consumption at converter was 1.008 million tonnes in August, according to Japan Ferrous Raw Materials Association. The scrap consumption rate for the raw steel output was 13.8%, which was 0.5 percentage points lower than July and first drop in 2 months. The scrap rate kept more than 13% for 5 months in a row while the rate was as low as less than 10% in January. A trading firm source said the scrap rate could increase more in September and October.

The scrap consumption rate at converter reached 14-15% in the peak in 2008. However, the rate decreased sharply since late 2008 due to major production cut by integrated steel makers. The scrap consumption increases recent months when the makers increase the production to meet higher export demand.

JFE Steel increased the scrap purchase in September to the peak level in 2008. The dealer source said integrated steel makers favor scrap as lowest risk measure for production increase. The integrated steel makers increase the scrap consumption at the converter to increase the steel output.

The higher purchase by integrated steel makers is expected to support ferrous scrap market when electric furnace steel makers keep low level production under slump in building activity. However, the integrated steel makers could reduce scrap purchase in and after November due to uncertainty of the demand.