Japan traders expect weaker yen to halt slide in ferrous scrap prices

2013-04-06

Even as both domestic and export prices of Japanese ferrous scrap continue to slide, traders in Tokyo Friday said this could see a halt soon as the yen weakens following the Bank of Japan's monetary easing policies announced.

Tokyo Steel Manufacturing, whose buying price sets the trend, pared its purchase prices by a further Yen 500/mt ($5.30/mt) effective Friday deliveries for all grades to all works except its Tahara plant near Nagoya.

The reduction took Tokyo Steel's buying price for H2 grade material delivered to its Utsunomiya works in the northern Kanto region to Yen 33,500/mt ($345/mt). On Wednesday last week, the mini-mill clipped its buying prices by Yen 500-1,500/mt.

Other mini-mills, including JFE Bars & Shapes and Godo Steel at its Funabashi works near Tokyo, tracked Tokyo Steel, reducing their buying prices Friday by Yen 500/mt too, traders said.

"Scrap deliveries to domestic mini-mills remain smooth because some scrap dealers in the Tokyo Bay area handling scrap for export or shipment elsewhere in Japan have stopped accepting material," a Tokyo-based scrap trader said. "They're waiting for scrap prices to fall further so collectors are delivering to mini-mills instead."

On Friday, Japanese traders were paying Yen 32,000-32,500/mt FAS, or free alongside ship, for H2 delivered to Tokyo Bay scrap yards for shipment abroad and to the western part of the country. This was Yen 1,500/mt lower compared with the previous week.

But a surge in the value of the dollar against the yen on Friday may help halt the slide in scrap prices, another Tokyo-based trader said.

The yen hit an intra-day low of Yen 97.06 against the dollar on Friday, the lowest since August 2009 and down Yen 4 from the start of April.

The weaker yen will make Japanese scrap cheaper for South Korean mini-mills and they may start buying aggressively, the trader said, adding that exporters might as a result not cut prices further.

Japan exported 4.86 million mt of ferrous scrap to South Korea in 2012, almost all of it priced in yen.

Another trader said that "because of the weaker yen, Korean mills may be able to lift their bid prices for yen-priced scrap without paying more in their own currency."

He added: "But it seems the Korean mills may have already secured scrap for May delivery. So they will just keep their bid prices level in yen, but enjoy lower-priced Japanese scrap in Korean won."

On Tuesday, Hyundai Steel bid Yen 33,000/mt FOB for Japanese H2 grade scrap and Yen 36,000/mt FOB for Shindachi grade, Yen 1,500/mt and Yen 1,000/mt cheaper respectively from the previous week.

Hyundai's bid of Yen 33,000/mt FOB translates to Won 395,204/mt on Tuesday but by Friday, thanks to the weaker yen, this fell to Won 385,305/mt, a saving of Won 9,899 or $9/mt, the trader calculated.

Hyundai booked about 40,000 mt of Japanese scrap, including 20,000 mt of H2 grade, a company official in Seoul said, adding that it could bid even lower in next week's tender.

Source: Platts

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