Chinese steelmakers eager to import ferrous scrap as seaborne prices fall

Singapore — The recent sharp downward price correction of Japanese seaborne scrap since start of the year has whetted the appetite of Chinese buyers now eager to import material, regional sources said Jan. 21.

"It seems Japanese heavy scrap prices have corrected down to levels close to our domestic ones," an eastern China steelmaker said. "If South Korea is able to buy at Yen 44,000/mt ($425/mt) FOB, it makes it actually doable for us too."

S&P Global Platts HRS101 Ferrous Scrap CFR China assessment saw prices tumble $38/mt since a week ago to $452/mt Jan. 21.

The resurgence of Chinese interest was sparked by a Jan. 21 seaborne deal concluded by a major South Korean mill, which was heard at Yen 44,000/mt FOB for an undisclosed volume of Japanese HS material. The price normalized for freight would then equate to a level of $452/mt CFR eastern China.

Concurrently, similar material of minimum thickness of 6 mm is domestically being traded at RMB 3,250/mt ($503/mt), delivered to mill in Zhangjiagang, and including 13% VAT. The price of that normalized for VAT equated to $445/mt.

"We have buyers from eastern China putting firm bids in at $445/mt CFR, and I think they are even willing to accept $450/mt," a Chinese trader said. "It's very much tradable now if Japan sellers are willing to negotiate. In fact, we are willing to make small losses to be one of the first few to trade."

However, some Japanese traders, although citing growing interest from Chinese buyers, held a more reserved tone towards lowering prices. "Deals like these are hard to come by," a trader in Japan said. "Many yards are not willing to accept this level that South Korea bought at."

Others however, cited concerns about how strictly China would apply its new standards for raw material imports.

"We are all waiting to see how well the first shipment, between Baowu Steel Group and Mitsui & Co., passes through customs and inspections," another Japanese trader said. "Over time we may actually better understand what kind of material would be acceptable to the Chinese customs. Till then, we are only touching base with the buyers without offering firmly."

Since China opened its doors for imports on Jan. 1, buyers have shown little enthusiasm for trading seaborne scrap as global prices then were around multi-year highs, which made less economical sense for steelmakers to import.