Dropping Ferrous Scrap Price in Tokyo

Ferrous scrap purchase price by electric furnace steel makers around Tokyo decreased to less than 10,000 yen per tonne for H2 for the first time in 6 years. The makers pay 8,000-10,000 yen under oversupply of scrap when the makers reduce the output and offshore market drops. A trader source the market players expect lower price and cannot find the bottom.

The scrap supply is easy with low level shipping from Tokyo bay to western Japan and offshore buyers and local makers’ purchase volume reduction. Tokyo Steel Manufacturing’s Utsunomiya plant decreased the scrap purchase price by 1,000-2,000 yen to 11,000 per tonne for H2 grade on Wednesday and many other makers followed the move. The purchase price is around 61,000 yen or 87% lower than peak in July.

Offshore buyers apparently turn to lower priced Japanese scrap recently and show sign to purchase again. However, local scrap supply could keep easy when domestic makers reduce the output reduction under slow market. US composite scrap price was US$ 97.5 per tonne in the first week of November. With the negative factors, the local market price could keep weak.

Scrap market price also decreases around Osaka. After Tokyo Steel’s scrap purchase reduction on Wednesday, local makers around Osaka and Himeji areas reduced the purchase price. The price could decrease more under oversupply with slower domestic consumption and slower export.

The scrap suppliers around Osaka concern situation forces them to pay for scrap supply to the dealers while they experienced such situation in 2001. However, the dealer source said they cannot secure industrial grade scrap without payment at least for a while. Tokyo Steel reduced the scrap purchase price cut for lower grade scrap including turning scrap. The dealers see Tokyo Steel and other makers hope the scrap price would hit bottom before the scrap suppliers should pay for scrap supply.