Ferrous scrap exports from China have been increasing. If it were a temporal increase, it might not cause a big problem. But, if it continued to increase, ferrous scrap supply demand balance in Asian markets might break.
[Chinese ferrous scrap exports expanding in Asian markets]
Currently, it is said that 6,000-8,000 tons of ground steel bars are prohibited producing by Chinese government. The ground steel bars manufactured by induction furnaces mainly require ferrous scrap as feedstock. The production cut by small-sized induction furnaces has reduced consumption of ferrous scrap in China.
The increase in Chinese ferrous scrap exports is said to have been caused by the oversupply of imported mixed scraps in the country, which were consequently exported to be sold in bonded areas. In China, stoppage of ground steel bar production led to price drops in ferrous scrap in Chinese domestic markets. According to a source, 50mn tons of ferrous scrap has difficulty in finding places to be sold per year. As a result, exporting negotiations have been held in various locations.
Negotiations for exporting to Taiwan as well as Korea have increased in the final week of April. Sales of H2 equivalent product has concluded at nearly $210 CFR basis, though there is no exact grade of H2 in China.
Chinese domestic dealers who have only domestic sales channels have shown interest in exports after hearing the concluded exporting deals. There is a high possibility the negotiations might increase. If Chinese dealers start exporting ferrous scrap to Vietnam, the main scrap buyer, the ferrous scrap prices are sure to drop as the Chinese scrap dealers will become competitors of Japanese ferrous scrap dealers. In fact, Tokyo Steel has lowered its ferrous scrap purchasing price by JPY5,000 per ton in total for April.