Fe Scrap Watch #46: Billet increased again! Not a temporary rise this time?
2016/03/29Chinese steel prices have recently steamed up the steel market.
Many say that the sharp rise in steel prices would be temporal one and some news have reported the prices have been already dropping, but in fact, the upward trend in prices are not likely to come down so easily this time.
The steel market had risen sharply in the 2nd week of March, but dropped soon. It is said that the prices had kept dropping last week, but manufacturers have not lowered the offering prices. Even after the domestic market recovered slightly, confusion had been continuously seen in the market where manufacturers stopped offering for exporting.
As the prices have been upward again since the end of last week, billet prices reached $300 again. Ferrous scrap prices are not likely to drop at all.
[New Blast furnace launched in Vietnam!]
As mentioned in the previous article that the safeguard was invoked for billets in Vietnam, the inquiries for ferrous scrap from Vietnam remains quite steady after that. It is expected to be well beyond 200,000 tons per month in March and April.
Especially, it should be noted that the Blast furnace of Formosa Plastic Group, FORMOSA HATIN STEEL, is to go on stream in mid-June in the northern part of Vietnam.
The Blast furnace, the first one of 2 furnaces to be launched in the first stage of the project, has production capacity of 3.5mn tons per year.
The main products of the furnace are hot-rolled coils and heavy plates. To launch it, the company has made inquiries to suppliers about the ferrous scraps. As it’s a Blast furnace, the mainstream of their inquiries are on BONUS grade, HS, H1 and shredded scraps. It is said to purchase about 30,000 tons per month. The inquiries are not likely to stop from Vietnam.
[Korea also needs Fe scrap]
Korean Hyundai Steel purchased about 50,000 tons of H2 by bidding at JPY20,400/t FOB last week, as if they were infected by Vietnam’s bids. The above mentioned price includes a premium price of more than 6,000t, but the H2 price actually reached JPY20,000.
It’s undeniable that flat-rolled product prices will rise further as generation is on downward trend in Korea and the hot-rolled coil offered price by Japan has risen by as much as JPY8,000/t.
The exchange rate temporarily reached at a level of JPY110, but in this situation, it is unlikely that the ferrous scrap prices reach the top price at around JPY20,000. So, bidding prices are expected to rise mainly in Vietnamese manufacturers also in the future.
It is obvious that Korea will soon have to move more quickly.
Especially, even if abovementioned re-rollers anticipating the rising price order the base material coils to Chinese manufacturers, only one-quarter of the orders could be accepted as there is a high probability of shortage in iron sources such as slab and billet.
[Pig iron prices also rose sharply]
Pig iron prices have also risen sharply in Asia. The prices of pig iron for steel were less than $200 before the Chinese New Year, but now are offered at more than $235 CFR. In proportion to the rising ferrous scrap price, pig iron prices are also increasing. Especially, as Russian pig irons have disappeared in the markets, pig iron users have made inquiries to Japan and Korea.
Ferrous scrap prices never rise. We might have to refrain from using such a phrase temporarily.