US Scrap Price May See Little Support From Kanto Tender

The price spread between US containerised HMS and higher-grade Japanese scrap may remain wide in the near future, as weak sentiment and fundamentals in the Asian steel market may not allow steelmakers to accept significantly higher imported scrap prices.
The August Japan Kanto tender was settled on 10 August at an average of ¥42,061/t ($311.56/t) fas for H2, equivalent to ¥43,061/t fob. The result led trade sources to now estimate H1/H2 50:50 cfr Taiwan at $375-380/t, while US containerised HMS 1/2 80:20 was last traded at $335/t cfr on 11 August.
Taiwanese steelmakers typically purchase H1/H2 50:50 from Japan at a premium of $5/t above H2, which is typically priced at $10/t above US containerised HMS 1/2 80:20.
It may be natural to expect US prices to move higher into line with Japanese prices. But some sources said that they are sceptical of firmer US prices because of tepid demand for finished and semi-finished steel products in north and east Asia. Many added that only Turkey and some south Asian countries such as India and Bangladesh have shown increased procurement appetite so far.
Taiwan’s domestic benchmark setter, Feng Hsin, cut its local rebar prices by NT600/t ($20.04/t) to NT$18,600/t on 8 August.
“It’s true the gap between US and Japanese prices has widened, but that does not mean that buyers are ready to accept Japanese prices,” a Taiwanese scrap buyer said. “Steelmakers would still prioritise US containerised scrap, which is cheaper and more widely accepted.”
The US is Taiwan’s largest ferrous scrap supplier. The US sent 623,000t of ferrous scrap to Taiwan in January-June, which represent more than 42pc of Taiwan’s total scrap imports, customs data show.
In Vietnam, local steelmakers faced the same predicament. Some buyers said their workable levels are no higher than $360/t for H2. A limited number of offers were heard for H2 at around $375/t cfr Vietnam earlier this week.
Most Japanese suppliers will not update their offers before mid-next week because of public holidays on 11 August and 13-15 August in the country. Japanese suppliers are widely expected to lift prices after the holidays, which will further widen the US-Japanese scrap price spread.
“The Kanto tender yesterday was a surprise to many,” a trader said. “Although it was lower compared to July’s Kanto tender results, it rebounded a fair bit from August’s lows.”