Mixed Views on Ferrous Scrap Price Trend by Japan Dealers

Japanese major ferrous scrap dealers showed mixed views on market price in second half of fiscal 2010 ending March 2010 under prevailing uncertainty. Fifty two dealers in Tokyo, Osaka and Nagoya answered to survey by Japan Metal Bulletin but the answerers were split into upward and downward with almost same balance. They try to find the trend by watching export transactions for East Asia, exchange rate and domestic demand.

The survey was conducted in early September when scrap market price decreased in some areas. The four percent answerers was increase and 27% answerers was upward trend for the second half of fiscal 2010 while 33% respondents expected downward trend and 4% answerers expected price decrease.

Some answerers said Japanese market increases the dependence on offshore market when the domestic market is heavily influenced by export price for East Asia since the beginning of the year. An answerer said the price move is more volatile than before along with offshore market and the dealers should be more cautious for short term market condition.

On monthly dealing volume, 33% respondents said the volume will recover while 23% answerers said flat and 37% answerers said decrease for the second half. However, Nagoya’s dealers represent more than 60% of the positive answerers when the area’ scrap generation is relative higher due to activity by automobile industry compared with other areas. Many of the dealers in Tokyo and Osaka answered the volume will be flat or decrease trend.

On capacity utilization of the scrap processing facility, only 6% answerers said full capacity operation. Seventy percent of the answerers reported the utilization is 70% or less when the answer was 25% for 50% or less and 44% for 70% or less. An answerer said the generation for demolition scrap is very low when new building start is very slow. Around 90% of the answerers reported the scrap yards were too many for the supply and demand in Japan.

Despite of the slow market, the dealers’ competition gets severer under very low scrap generation. They try to secure the scrap even at higher price under downtrend market. Fifteen percent of answerers reported their margin is almost appropriate level while 52% answerers said 50% of the transaction is loss making and 33% answerers reported almost all transaction is loss making level.