Japan: Bangladesh mill secures Jun'26 Kanto scrap cargo; weaker JPY pushes FAS price down $6/t m-o-m

• Bangladeshi mill returns to the Kanto tender after a two-month pause
  
  
• Rising energy costs, policy uncertainty pressure Bangladeshi mills
  
  

Japan's June Kanto H2 export scrap tender recorded its first correction after ten consecutive monthly gains, with the price easing by JPY 96/t ($1/t) m-o-m to JPY 54,506/t ($340/t) FAS for a 20,000-t cargo. While the decline in yen terms was marginal, the fall was more pronounced in dollar-denominated terms, with the tender value dropping by around $6/t from May's level of approximately $346/t.

The latest tender price translates to approximately $347-348/t FOB Japan and below $400/t CFR Chattogram, with shipment scheduled by 31 July 2026. The correction was primarily driven by the depreciation of the Japanese yen against the US dollar, with the exchange rate weakening from around JPY 157.1/$ during the May tender to JPY 160.4/$ in June, reducing the dollar-equivalent value despite largely stable yen-denominated prices.

The cargo was awarded to a Japanese trading company for shipment to a Chattogram-based mill in Bangladesh, marking the country's return to the Kanto market after a two-month absence. The tender received 14 bids totalling 120,400 t against an offered volume of 20,000 t.

Domestic Japanese scrap firms up despite export weakness

Interestingly, the decline in the Kanto export tender price contrasted with developments in Japan's domestic scrap market. Domestic Kanto H2 scrap prices increased by around JPY 1,000/t ($6/t) m-o-m to approximately JPY 54,000/t ($337/t), supported by steady domestic demand and tight availability.

Market participants noted that domestic fundamentals remained largely unchanged, with the weaker yen helping exporters maintain competitiveness in overseas markets. A Japanese trader indicated that currency movements, rather than any deterioration in scrap demand, were the primary factor behind the lower dollar-denominated tender outcome.

Bangladesh mills await budget clarity

Despite Bangladesh's apparent return to the Kanto market, imported scrap buying sentiment remained subdued ahead of the government's FY'27 budget presentation on 11 June. Market participants expressed concerns that higher electricity surcharges and additional industrial levies could further increase steelmaking costs at a time when margins remain under pressure.

BigMint weekly assessments, CFR Chattogram

• European-origin containerised HMS (80:20): $382/t, down $2/t w-o-w
  
  
• European-origin containerised shredded scrap: $418/t, up $5/t w-o-w
  
  
• Japanese-origin bulk H2: $403/t, down $12/t w-o-w
  
  
• US-origin bulk HMS (80:20): $410/t, down $2/t w-o-w
  
  

Indicative offers remained mixed, with Philippines-origin GI bundles heard at $345-350/t CFR Chattogram and UK-origin HMS (80:20) at around $360/t CFR Chattogram. Shredded scrap offers from Australia and the UK were reported at $420-430/t CFR Chattogram, while bids for Australian-origin shredded were heard near $410/t CFR Chattogram -- a persistent bid-offer gap and cautious buying sentiment.

Weak construction activity, sluggish real estate investment, and tight liquidity conditions continue to limit steel consumption, keeping buyers cautious. Industry observers believe that measures aimed at improving consumer purchasing power, easing financing costs, and supporting domestic manufacturing could help revive demand and improve sentiment across the steel sector.

Local scrap gains preference

Domestic scrap prices in Bangladesh increased to BDT 55,000-56,000/t ($448-456/t), up from around BDT 50,000/t ($407/t) a week earlier. The sharp rise in local prices has reinforced mills' preference for domestic procurement despite the recent softening in international scrap markets. Market participants noted that buyers remain focused on preserving liquidity and limiting exposure to policy uncertainty ahead of the FY'27 budget announcement.

A Dhaka-based mill source indicated that a proposed 20-25% increase in power-related charges could significantly impact production economics. Combined with elevated borrowing costs, higher energy prices, and currency depreciation, many mills continue to operate under strained margins amid weak steel demand.

Another Chattogram-based steel mill source noted that recent increases in electricity tariffs have already added around BDT 2,000-4,000/t ($16-33/t) to production costs. Any further hikes, along with higher gas prices and dollar-linked import expenses, are expected to weigh further on profitability.

Local scrap remains the preferred choice for most Bangladeshi mills due to easier availability and quicker deliveries. Weak construction activity and slow steel demand continue to keep buyers cautious, with most mills purchasing only for immediate requirements. Unless imported scrap prices become more competitive or domestic supplies tighten, import activity is likely to remain limited in the near term.

Outlook

BigMint expects Bangladesh's imported scrap market to remain under pressure as mills continue to prioritise liquidity management and closely monitor developments related to the FY'27 budget. Demand is likely to remain largely need-based amid weak steel consumption, high borrowing costs, and elevated energy expenses. While the softer JPY has improved the competitiveness of Japanese scrap, import activity is expected to stay measured unless there is a clear improvement in steel demand or greater clarity on production costs and policy measures.