Taiwan’s imported scrap prices hit 21-month low

Taiwan's imported containerised scrap prices fell to a 21-month low on 21 August, driven by sluggish domestic steel demand and a surge in cheaper billet offers from China.

The daily containerised HMS 1/2 80:20 cfr Taiwan imported scrap price fell by 4pc on the day to $325/t on 21 August. The price, which has been declining steadily since the second quarter of 2024, was down by 5.8pc from $345/t on 1 August, Argus data show.

The price was last lower in November 2022 at $323/t, the data show.

Taiwan's imported scrap market has been under pressure since the start of April owing to a seasonal slowdown, with steel mills entering the energy conservation period, which typically lasts from May through September or October, depending on local authority regulations. During this period, electricity prices are relatively raised, with industrial users facing hikes of up to 15-25pc, depending on their consumption levels. To manage the rising costs, many steel mills reduce their shift work, cut production during peak energy demand, or shift operations to off-peak hours, leading to a drop in steel output. Trade sources estimate that the lower output could be in the range of 10-30pc island-wide.

But prices failed to rise despite these operational adjustments, as steel demand was affected by adverse weather conditions disrupting construction activities, particularly in July. Market sources told Argus that prominent steelmakers have sought to lower local rebar prices to entice buyers' interest, but downstream steel buyers remain passive and convinced of even lower prices in the near term.

The drop in scrap prices was also exacerbated by an influx of cheap billet offers from China, as well as other regions like Russia, South Korea, Indonesia, and Japan. This weighed heavily on scrap procurement efforts, benefitting steel re-rollers on the island. Market sources told Argus that the price of vanadium-added billets, which stood at approximately $515-525/t over May-June, fell to around $475-485/t by mid-August. They added that factoring in a $180-200/t operating cost to manufacture billet from scrap, scrap buyers and mills estimate scrap imports should be below $300/t to remain competitive.

But some steel mills remain cautiously optimistic despite such challenges and pointed to some supportive factors that prevented scrap prices from hitting rock bottom.

"The global economy is steadily recovering … Taiwan's car sales are steady, and the demand for factories, offices, and residential construction is rising, leading to an increase in the demand for steel related to cars, home appliances, and constructions," Taiwan's largest state-owned steel manufacturer noted in a preliminary report released in late July.

Scrap suppliers to Taiwan also maintain a positive outlook, citing sustained demand for housing despite the government's cooling measures, such as lowering the loan-to-value ratio for second-home purchases from 70pc to 60pc. A scrap buyer said that interest rates for housing have stayed relatively low, making financing for real estate more accessible. But there are concerns that potential rate hikes could slow the market, especially for buyers heavily reliant on mortgages.