Low Level Japan Integrated Steels’ Ferrous Scrap Use

Japanese ferrous scrap consumption decreased to 486,000 tonnes or 10.5% for converter steel production in February, which reached 10% for the first time in 2 months, according to Japan Ferrous Raw Material Association. The consumption rate was 3.1 percentage points lower than a year earlier level when domestic integrated steel makers reduce the production. Many of the integrated steel makers’ steel works didn’t purchase scrap from market in March and the consumption could keep low level for months.

The converters’ scrap consumption rate decreased to 9.9% in January, which decreased to less than 10% for the first time since December 2003. The consumption rate improved by 1 point in February but the rate was as low as November and December 2005 and much lower than peak in November 2008.

The integrated steel makers keep large volume of scrap inventory at the works. Their scrap consumption is very low under major steel production cut. Many of the works including Nippon Steel’s Oita works and JFE Steel’s West Japan works, which aggressively purchased scrap from the market last year, keep out of the scrap market.

A trading firm source said the integrated steel makers’ scrap demand could be almost zero in May while their purchase plans are unknown. The source expects the makers could even sell the scrap inventory to the market.