Domestic SUS304 Scrap Market: Completely in downward trend, but actual price drop is unknown due to serious lack of generation

2015/09/01

The market environment changed drastically after the Japanese Bon holiday break.
Nickel prices dropping below $10,000/t and appreciation of the yen could become factors that may put downward pressure on domestic SUS304 stainless steel scrap prices. However, the serious reduction in generation of scrap prevents falling nickel prices from affecting the domestic scrap prices.

As shown in the table below, the average LME nickel price for August was $10,380/t as of 27 August 2015, down by $1,021/t compared to the previous month.
When overviewed from viewpoints of ongoing global financial market and commodity market, nickel prices are expected to shift from $9,000/t to a $8,000/t level, while the average rate of the Yen which was 124.53yen against U.S. dollar, is more likely to appreciate to 121-122 yen.
The nickel prices in May seem like light-years ago. It will take a substantial amount of time for nickel prices to recover to then $13,000/t level.

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As to the SUS304 stainless steel scrap, the largest exporter, S Company offered JPY140 per kilo early August, but it finally lowered its offered price by JPY5 per kilo to JPY135 per kilo late August. Not limited to S Company, Korean POSCO seems to have intentionally increased their purchase volume from Japan based on their domestic situation. The S Companyfs exporting price for POSCO was JPY147 per kilo CIF. In September, it will not drop below JPY140 per kilo.

Domestic manufacturersf open-announced official purchasing prices delivered to mills are JPY130 yen for NSSC and Nippon Yakin Kogyo. Daido Steel and other specialty steel manufacturers in Aichi prefecture have also lowered their purchasing prices by JPY10 per kilo to JPY130 per kilo. In response to this, scrap dealers in the northern part of Kanto region also have lowered their purchasing prices to JPY127 per kilo, but current market prices in Kanto region remains flat around JPY135-137 per kilo.

Theoretically, the actual market prices are around JPY120 per kilo, but the movements of stainless steel scrap have slowed down as much as a major dealer specialized in stainless steel scraps in Kansai region saying that gthe movements were down 40-50% year-over-year in Augusth. Japanfs weak real economy is reflected in the circulation of scraps. The serious situation also can be seen in the fact that even the generation of turning which is relatively high in Kansai region has decreased.

The same situation told by the said specialized dealer in Kansai region that gthe movements extremely slowed down after the SUS304 scrap prices dropped below JPY150 per kiloh are seen throughout Japan. As the lack of scrap generation will continue within the year or after the new calendar year, dealers are more likely to tend to keep their gprecioush inventories in hand. So, the situation makes it relatively difficult to collect scraps even if JPY140 per kilo is offered or JPY145 per kilo is offered by the ferrous scrap dealer, I Shoten in Kyoto.

Meanwhile, further production cut in general-purpose SUS304 stainless steel sheet which have already suffered from the deflationary spiral and the decreased demand can be expected because specialty stainless steel manufacturers may face the decline in demand due to price drop and China-originated global recession. Manufactures have not aggressively purchased scraps, but they have purchased some. Even if they significantly reduce the production, they will need some scraps to maintain its minimum operating rate to offset fixed costs.


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As a result, as to the stainless scrap market for September, if nickel prices drop, manufactures will avoid lowering their purchasing prices unilaterally to response flexibly to pricing. SUS304 stainless steel scrap prices remains at the lower half of JPY130 per kilo.

Also, the demand for SUS400 series scrap decreased due to the oversupply in chrome-based steel materials and the continued price drop caused by Chinese and Taiwanese dumping ($700/t can be seen). In addition, ferrous scrap prices also continued to drop. As a result, SUS400 series scrap price may decrease by JPY2 per kilo from the current price range of JPY38-40 per kilo.

(Edited by Sasaki)

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