TOKYO Japanese scrap prices have jumped for a third consecutive month in the latest export auction on the back of rebounding demand, although some question whether the gains can be sustained.
Tokyo-area scrap dealers highest winning bid for February deliveries of H2-grade scrap (a mix of No. 1 and No. 2 heavy melt) was 32,850 yen ($367.63) per tonne f.a.s., up 23 percent from the prior level. Participants successfully bid for more than 20,000 tonnes.
This means that Japanese export prices for scrap have risen about 45 percent in the past three months, now standing at their highest level in seven months.
The strong interest in the auction has come as little surprise. Export prices to South Korea have been gradually rising as the countrys mills take advantage of the strong won and the falling yen, which together make Japanese scrap relatively cheaper to purchase.
Also buoying prices is robust regional demand for imported scrap, particularly from China and Taiwan, where mills are looking to fill inventories before the Lunar New Year holiday next month.
However, some have been surprised by the size of the jump, given that prices are now about 2,000 yen ($22.40) per tonne higher than the most recent export contracts concluded between Japanese traders and Korean mini-mills.
The big jump in prices at the tender has forced Tokyo Steel Manufacturing Co. Ltd., Tokyo, to raise its scrap purchasing prices to the highest level seen since last May, despite only last week protesting that charges are too high given current domestic selling prices.
As of Feb. 17, the company is now paying 30,500 yen ($341.50) per tonne for all deliveries to its Utsunomiya Works; 30,000 yen ($335.87) per tonne for those to its Okayama, Kyushu and Tahara plants; and 29,000 yen ($324.69) per tonne for those to its Takamatsu facility. Thats up 500 to 1,000 yen ($5.60 to $11.19) per tonne from previous price levels.
But some traders are beginning to question whether export prices can keep rising, arguing that Japanese scrap prices have shot up too rapidly and inquiries from Korean mills appear to be waning.
Nevertheless, scrap traders appear to be taking an aggressive stance, and some traders say that both domestic and export prices could still rise a bit furtheralthough they add that they wouldnt be surprised if prices subsequently eased in the coming weeks.
A version of this article was first published by AMM sister publication Steel First.