Japan’s H2 scrap export prices down slightly in tender

Posted on 10 June 2021

The winning bid in Japan’s monthly export tender for H2 grade scrap held Wednesday was Yen 49,195/t ($449/t) FAS, lower by a tiny Yen 84/t from the top bid in the May auction. Crucially, auction organizer the Kanto Tetsugen, an alliance of scrap dealers in the Kanto region around Tokyo, rejected the runner-up bid as too low so only the one bid was accepted – for just 7,500 tonnes, Mysteel Global learned.

 

Wednesday’s tender attracted a total of 22 bids from both Kanto Tetsugen members and registered traders, seeking a total of 128,700 tonnes of scrap – with the average bid price at Yen 46,233/t FAS.

“The top bid was much higher than the latest bids overseas buyers are tabling for H2 and it surprised us,” a Kanto Tetsugen official admitted. “We had expected that scrap prices would rise, thanks to firm demand from domestic mini-mills and reduced availability, but (the bid) was still a surprise.”

A Tokyo-based distributor believed that in submitting a fairly high bid, the winner (rumoured to be a scrap subsidiary of a major Japanese integrated mill) must be keen to fill a backlogged order booked earlier when prices were higher. “We won’t be able to sell scrap for export at such a high price soon,” he lamented.

To put Wednesday’s auction in context, the most recent bid for H2 scrap placed with Japanese traders by a South Korean mini-mill was at Yen 46,000/t FOB (equivalent to about Yen 45,000/t FAS) on June 2. This was much lower than the offers that Japanese suppliers are nominating, and sources said the Korean mill was unable to secure much volume, as reported.

The Kanto Tetsugen usually offers about 20,000 tonnes of H2 grade scrap in each month’s tender, with two or sometimes three winners sharing the tonnage. That the dealers Wednesday decided to reject the runner-up bid is unusual.

A second Tokyo-based distributor believed the second bid was much lower at around Yen 48,000/t FAS and believed that the tender organizer had feared that should that bid be accepted, it would suggest to the market that prices are softening – when Kanto Tetsugen members say they’re expecting Japanese scrap prices to rise.

The winning parcel, thought destined for Vietnam, must ship by the end of July, Mysteel Global understands. This is also important because another consideration is the likelihood of the Tokyo Olympic Games proceeding late next month, despite most of the Japanese public wanting the event cancelled.

Most activities associated with the games, which are scheduled to start on July 23, will take place not far from Odaiba port, the primary dispatch port for Kanto Tetsugen auction tonnage.

“If the games go ahead, many roads around Tokyo Bay will be blocked – for security or other reasons – and (Kanto Tetsugen members) might be afraid that due to the congestion, they might have difficulties delivering scrap to the port,” the distributor said. “They decided to accept smaller tonnage, rather than run the risk of failing to make the shipment deadline.”

A procurement official from a mini-mill in western Japan noted that though the winning bid was lower than last month’s, it was still quite high and well above prevailing export levels. “I really hope the tender result doesn’t influence the market and causes domestic prices to stop falling or worse, to rise a little,” he said.

Source : Mysteel Global