Very bearish Asian SUS scrap market

2015/08/24

SUS304 scrap markets have become weak on a global basis along with the weak LME nickel prices.

The yen values of Asian SUS304 scrap prices (SABOT) standing at $1,150-1160/t (CIF Taiwan, Korea) are about same level as domestic stainless steel manufacturers’ purchasing price level. As it is about JPY130 per kilo ex yard, it’s difficult to conclude a contract.
However, considering the nickel market outlook, reduction of production in domestic stainless steel manufacturers and drop in scrap prices, it might be better because contracts could be concluded even at lower prices.

写真


(*as of 19 August 2015)

Domestic stainless steel specialty manufacturers’ purchasing prices of SUS304 scrap, which are now at around JPY135 per kilo, are moving down toward the purchasing price of NSSC that lowered its purchasing price by JPY20 yen in total to JPY130 in June and July.

The export prices ex yard are close to those prices. Stainless manufacturers in Kanto region also lowered its purchasing prices by another JPY5 to around JPY130 per ton this week. Specialty steel manufacturers in Central Japan seem to plan to lower them by almost JPY10 because of recent nickel price drops. The purchasing prices of specialty steel manufacturers, which were originally higher would drop to JPY130 per kilo if they conducted price cut by JPY10 per kilo.

S company, the largest exporter for Korea keeps its price at JPY135 per kilo, but considering POSCO’s price for next month, the price could drop to JPY130 per kilo at any time.

As the nickel prices evidently dropped to this level, the product prices that manufacturers and distributors are defending would be also forced to be cut according to the reality. Even if the production may be adjusted based on actual demand, but in the current market more steel materials are sold at JPY50-60 lower prices than the common price at JPY310-320 (SUS304 grade cold-rolled steel sheet).

Slow movement in scrap despite price drop
Previously, SABOT prices set 10% of nickel prices as standard values, which is the same now. So, SABOT price at $1,000/t (low level during the financial crisis in 2008) would be relatively realistic.

However, movements of materials are very slow although such a price drop can be estimated.
“Speaking only of the scrap market, the situation is far worse than that of the financial crisis in 2008. Then, materials were moving although the prices dropped. Now, materials don’t flow into the market despite the price drop. So-called structural decrease in generation is the common sense in the current Japanese scrap market. Though not equal to the so-called “New Normal” in China, current low prices and low distribution will become common”, a major dealer specialized in stainless scrap in Kanto region said.

写真

SUS400 scrap prices also are showing a declining trend due to downward trend in ferrous scrap price, price drop in ferrochrome and decreased product selling prices and lower demand in SUS400 stainless steel. A trader in Central Japan, T company which had gathered SUS400 scrap for Thailand recently lowered its purchasing price of SUS400 scrap by JPY1-2 per kilo. The contract prices are estimated to be around JPY36-37.

(IRUNIV YUJI TANAMACHI)

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