Japanese Domestic SUS Scrap Market Update: The mainstream market price to be at a 130 yen level in August


While the index nickel prices are dropping further from a low level, the prices for SUS304 scrap are declining globally. Further declines are more likely to penetrate also Japanese domestic market in August.

Market prices have not yet reflected NSSCfs purchasing price cut of scrap by 20 yen in total, which has been conducted twice by 10 yen since the end of June, now in early August. It is because of extreme stock shortage caused by reduction in scrap generation and distribution. In getting a quick overview of the situation for August, market prices are expected to come close to the NSSCfs purchasing price. However, not dropping by just 20 yen, the purchasing prices of NSSC and its directly affiliated scrap processor, JSP are not dropping by just 20 yen but decided on a case-by-case basis. So, their purchasing prices were come across occasionally at a 140 yen level.

Key factors for purchasing prices of SUS scraps for August
@1. In Kanto region, Nippon Yakin Kogyo Co., Ltd. will reduce production to around 22,000 tons in August.
@2. In central Japan, Daido Steel and Aichi Steel will also reduce production in summer and buying motivation for scrap will be low with scraps fully stocked.
@3. Inventory adjustment will continue in September as most Japanese companies balance the accounts at the end of the month.

Nippon Yakin, Daido Steel and Aichi Steel also reduced their purchasing prices for SUS304 scrap by 5 yen per kilo to 130-140 yen per kilo in August.
However, they are suggesting the possibility of reducing the purchasing prices further in view of nickel prices this month.

The exporting prices for Taiwan were at $1,200-1,230/t CFR in July, but they are more likely to drop to around $1,100/t in August. Being converted into yen, they will be below 140 yen per kilo CIF. Another key factor is Korean POSCO.
When POSCO started business reforms with rapidity after suspected bid-rigging and executivesf removal from office, an explosion accident occurred at its Pohang FINEX plant on 29 July. Things went from bad to worse. Whether this accident affected is hard to say, but POSCOfs purchasing prices of stainless scraps for August were decided late in the evening of 31 July.
The purchasing price of SUS304 scrap is 1,345 won per kilo, down by 80 won per kilo compared to a prior month. Being converted into yen using the exchange rate of 31 July, the price dropped by 15 yen to 143 yen, almost the level of Japanese stainless manufacturersf purchasing prices (or a little higher than those prices).

Compared to the drop in LME nickel price in July ($11,410 which is $1,363 lower than the average price in June), the drop in POSCOfs purchasing prices can be said to be normal.

Being inferred from POSCOfs purchasing prices from Korean domestic market and the transition of exporting prices from Japan to Korea, exporting prices for Korea will be around 140 yen per kilo CIF Pusan in August. Japanese shippers for Korea such as S company will have to drop their purchasing prices of SUS304 scrap to around 135 yen per kilo.

POSCOfs purchasing prices are as shown in the table below. The purchasing price of SUS316 scrap dropped to 1,880 won, down 140 won from an earlier month. Being converted into yen, it will drop by 24 yen to 200 yen.

(Transition of POSCOfs purchasing prices of SUS scraps in Korean domestic market)

However, when viewed from current nickel prices and market environment, 130 yen or 120 yen seem to be just way stations for moving down in SUS304 scrap.
Nickel price is on the verge of hard-landing on a $10,000 level. Even so, there has been no bold reduction in supply or closure of refineries. Some Chinese nickel pig iron manufacturers clarify their intention to continue production up to the limit of costs and not to stop selling raw materials even if the prices are lower, saying that they can hold out till $8,000. This attitude leads directly to put significant downward pressure on the prices.


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