Daily Steel News - 25 Feb 2009

Tokyo Steel cuts scrap buying prices twice in two days
Tokyo Steel Manufacturing is cutting its scrap buying prices again, this time by ¥1,000/tonne ($10/t) for all grades at all works effective from 26 February arrivals. The reduction is the mini mill's second this week after it clipped prices by ¥1,000-2,000/t from 24 February. After Tokyo Steel's earlier reduction, other mini mills followed and pared their prices by the same margin. "But scrap export prices also fell by ¥1,000/t to around ¥20,000/t fob for H2, so Tokyo Steel again decided to cut its prices," a scrap trader tells Steel Business Briefing, pointing out that with its reduced output Tokyo Steel doesn't need much scrap. After the reduction, Tokyo Steel's H2 prices at its Okayama and Kyushu works become ¥19,000/t $196.3/t) and those at Takamatsu and Utsunomiya become ¥18,000/t and ¥20,000/t respectively. Average scrap buying prices by Japanese mini mills peaked at ¥19,177/t ($198/t) in the first week of February after 26/02/09 9/18 bottoming at ¥9,588/t last November, SBB learns from the Japan ferrous raw materials association.

Japanese scrap price falling
Japanese scrap price keeps on falling and may decrease further because China and Taiwan have refrained from buying scrap. It is reported that Korean Hyundai purchased H2 scrap from Japan last week, at ￥22,000/ton. Besides, Hyundai won’t purchase more for the time being, but they will consecutively request to reduce the purchasing price. Japanese high level scrap price won’t slide in line with dropping H2 scrap price. Hyundai’s latest purchasing price for new scrap was ￥25,000/ton, and that of P&S scrap was ￥24,000/ton.

Tokyo Steel cuts H2 scrap purchase price
Japan’s Tokyo Steel is cutting their H2 scrap purchase price by ￥1,000～2,000/ton to the level of ￥19,000～21,000/ton, first adjustment over the past three weeks.Consequently, if calculated on base price of ￥20,000/ton and plus sea freight, Japan’s offer on H2 scrap to Taiwan stays at US$240/ton.

China to adjust import, export tax policy in March
China will launch new policies on steel industry in March, which involves more flexible export duty to ensure 15 percent of total steel output for export market. This plan indicates that Chinese steel export may decline by 50 percent in 2009 and steel makers are facing the hardest time in recent years. China will take further actions to expand domestic steel consumption especially in construction steels, which is occupying 50 percent of total steel consumption locally. China will keep current tax level for steels with low grade and profit margin while will impose more attractive tax on highly profitable steels. However, import tax on some steels may be increased by the government in order to protect internal steelmakers.

China's overcapacity may be 200m t/y this year - Eurofer
China has no global cost advantage in steel making, yet could have a crude overcapacity of 100-200m tonnes/year this year, according to a new study on the country's industry prepared by Eurofer, the European steel makers' association. The study is primarily designed to alert the European Commission and EU governments to China's insidious influence in the global steel market, Ian Rodgers of UK Steel told Steel Business Briefing at its launch in Brussels.
The growth of China's industry over the last 5-10 years was not market-driven, said Markus Taube of Germany's Think!Desk Consulting, and author of the Eurofer study. Rather it was steered by a "cartel" involving top steel managers and governmental and industry bodies (such as the National Development & Reform Commission and China Iron & Steel Association).
The result has primarily benefited the top 20 or so mills. Many of the smaller enterprises, described as "renegades" by Taube, are outside this "China Steel Inc" state-business relationship. They often align themselves with local stakeholders, and defy central government policies, he added. These various alliances, often backed up by subsidies and other financial benefits detailed by the company in the report, have supported the industry's expansion. Pre-crisis, Taube estimates overcapacity at more than 100m t/y; this year, including an estimated 10% decline in output, it could reach 200m t/y. Consequently China's exports to Europe have increased significantly in the last few years. Taube says this reflects the domestic market distortions, which have depressed costs and unfairly strengthened the mills' international competitiveness.