SINGAPORE South Korean steel producers might import less ferrous scrap due to the weakening won against the U.S. dollar, but the cut in purchases is likely to be only temporary, sources say.
"Imports will decrease in the short term, but it will not go on for very long," a mill source said April 9, noting that while the exchange rate may not be the most favorable, not buying scrap simply isnt an option.
Escalating tensions between North and South Korea have taken a toll on the latters currency during the past week. On April 9, South Koreas won was trading at about 1,140 won to a dollar, its lowest level since July.
But the source said he expects the current crisis between Seoul and Pyongyang to eventually blow over.
Another mill source said he saw the weakening of the won as having very little overall impact on the local steel market for now. South Korean mills import scrap and export steel products, so the impact of the currency depreciation on both sides will offset each other, he said.
These mills may even take a more aggressive stance with their export pricing with the won/dollar rate becoming more favorable to them, a Singapore-based trader said.
South Koreas Hyundai Steel Co. has reissued an export tender to sell billet after skipping one last week and could start considering bids in the region of $540 per tonne f.o.b. given that the weakening won will make Korean products more competitive in overseas markets, the trader said.
Last week, Hyundai Steel decided not to award the tender due to unfavorable bids and was reportedly targeting a price of no less than $550 per tonne f.o.b. at the time.
A version of this article was first published by AMM sister publication Steel First.