Japan: Scrap exports drop in May'21 m-o-m on firm domestic demand, freight concerns

Japan, one of the world's leading ferrous scrap exporters, registered a significant drop in volumes in May’21. The exports volumes dropped to 0.68 million tonnes (mn t) in May'21 against 0.86 mn t in Apr’21, as per customs data maintained with SteelMint.

The key reasons behind fall in exports:

• Fewer export deals were noticed due to the Japanese Golden Week holidays in early May, when most of the scrap yards were shut and export activities were limited.
  
  
• Firm domestic steel demand resulted in active scrap procurement by Japanese local steel mills. Japan’s crude steel output increased from 7.8 mn t in Apr’21 to 8.4 mn t in May’21.
  
  
• Volatility in freight rates impacted Bangladesh’s bulk scrap purchases from Japan. Bulk scrap offers from the US were around $530-540/t CFR Chittagong levels but bulk H2 offers from Japan were at $610/t CFR Chittagong due to higher freight rates, turning Bangladesh-based mills away from Japanese bulk bookings.
  
  

However, on a y-o-y basis, Japanese scrap exports remained largely stable at 0.68 mn t in May'21 as compared to 0.67 mn t in May'20. On the other hand, Japan produced 8.4 mn t of crude steel in May'21, up 42.4% over May'20, according to World Steel Association (WSA) data.

Key highlights of May’21:

• Vietnam largest importer: Vietnam became the leading importer with 0.29 mn t, up by 12% m-o-m (month-on-month). Despite high offers, Vietnamese scrap buyers remain active in the market due to China's increased inquiries for other semi-finished products. South Korea, the second largest importer, bought 0.21 mn t from Japan, lower by 30% on the month, as they were expecting a fall in prices.
  
  
• Scrap exports to Bangladesh decline: Exports to Bangladesh decreased to 0.02 mn t in May’21 against 0.11 mn t in Apr’21. Increased freight rates from Japan to Bangladesh have kept the majority of scrap exporters quiet. Most of the suppliers are not interested in selling big volumes on longer distances due to volatility in vessel freight rates and the tight logistics situation.
  
  
• Japan export offers up: SteelMint's assessment for bulk H2 Japanese scrap export prices stood at JPY 43,600/t FoB Japan in Apr'21 as compared to JPY 43,000/t a month ago, up by JPY 600/t on a monthly basis. Major Japanese scrap buyer China has actively booked and restocked various bulk Japanese cargoes before the holidays.
  
  

• Japan's billet exports rise 26% m-o-m: Japan's billet exports in May '21 were recorded at 0.29 mn t, a m-o-m increase of 26%, as per SteelMint's data. Taiwan, South Korea, China, Thailand, and Indonesia were the predominant importers of Japanese billets. The rise in exports can be attributed to increased buying from the US and Thailand.
  
  

Outlook
Japanese scrap export bookings for Bangladesh are expected to remain on the lower side. However, they are expected to increase for South Korea and Taiwan.