Asian scrap prices plunged in the first quarter owing to weak demand

The Asia ferrous scrap complex had a Lackluster performance in the first quarter of this year because of a number of issues, including geopolitical concerns, weakening construction activities, sluggish steel demand, and a banking crisis. The global economy in 2023 continued to be affected by high inflationary and recessionary pressures, leading to tighter monetary policies and hiked interest rates. This, in turn, drove up the upstream purchasing costs for some buyers as raw material suppliers had to maintain intensive offers due to rising inflation and energy costs. The banking crisis in both nations including the US and Europe further exacerbated the situation, causing concerns among market participants of the possible ripple effects in Asia.

The predicted growth of Asia's ferrous Steel and scrap market did not occur despite the reopening of China's borders and the relaxing of Covid-19 regulations. The predicted surge in the Chinese market did not materialize, despite the bullish outlook held by market participants in March, the height of building season, and potential stimulus measures to jump-start China's post-Covid economy that was considered during the national congress. Due to the stalled real estate market, China's actual steel consumption during the busiest construction season was lower than anticipated.

China's official manufacturing PMI fell by 0.7% in March compared to February, while the country's steel purchasing managers' index (PMI) fell by 1.7%. Reduced bids for steel were made in the seaborne market as a result of the adverse sentiment indicated by China spreading to neighboring markets. As a result, Southeast Asian steelmakers' profit margins suffered, which ultimately led to a drop in the market for ferrous scrap.

According to the unstable nature of the Chinese steel market's recovery, Vietnam, a major consumer of ferrous scrap in the Asian seaborne market, has been dormant since February. Vietnamese Steelmakers have been forced to maintain low levels of utilization and refrain from making significant purchases from the seaborne market due to a combination of strict rules on the domestic real estate market, high financing costs, and stagnating export markets.

A combination of rising demand and prices in the US, the CFR Vietnam deep-sea bulk scrap price rose significantly during the first quarter. Many scrap exporters consequently took a bullish stance on scrap pricing and either curtailed or withheld their offerings. In February and March, scrap traders also had trouble getting scrap cargo.

Recent sources state that South Korean mills have shown little interest in importing ferrous scrap due to a consistent supply of domestic scrap and sluggish steel sales. In Korea, the costs of domestic scrap remained comparatively consistent during the first three months of the year. While other Asian regions in the first quarter of the year saw a fall in regional buying, Taiwan occasionally and modestly observed increases in imported scrap prices. Meanwhile, rising domestic demand resulted in higher pricing for scraps produced in the US. Following the lunar new year break, local mills were excitedly looking for bids to take advantage of the construction season wave. Given the average calorie limitation period, which runs from June to September, this is particularly significant.