Hyundai Steel reworking scrap import deals-source

SEOUL, Oct 29 (Reuters) - South Korea's Hyundai Steel (004020.KS) said on Wednesday it was renegotiating scrap import deals as prices of the recyclable metal have fallen so sharply on fears deepening global credit crisis may weaken steel demand.

"We are renegotiating on some cargoes of scrap metals as prices have fallen so rapidly to as low as $150 per tonne from above the $700 per tonne level this summer when we signed import deals," said a company source who declined to be named.

"We've already finished renegotiations on some imports and still working on some other cargoes which are already in South Korea."

The response comes amid market talk that Hyundai Steel, a member of the world's No.5 automaker Hyundai Motor Group and South Korea's second-biggest steelmaker, could default on 30,000 to 40,000 tonnes of heavy melting scrap.

Prices of scrap, a feedstock used to make steel by mini mills operating electric arc furnaces, have tumbled around 80 percent in just three months, as steel prices weaken, hit by weakening housing market and spreading global financial crisis.

Average scrap prices in Japan rose to a record above 68,000 yen ($686) per tonne in July but fell back to around 14,000 yen this week, according to the Japan Ferrous Raw Materials Association.

As raw material prices take a sharp downturn and demand slows dramatically, some Asian steel firms are defaulting on and delaying imports of contracted scrap as well as negotiating to lower prices.

Tens of thousands of tonnes of imported copper and aluminium scrap are sitting at warehouses and open yards in the Chinese ports of Shanghai and Ningbo and in Hong Kong after buyers walked away and gave up their initial payments. [ID:nHKG344375]

Hyundai Steel, South Korea's biggest steel scrap importer, purchases around 5 million tonnes of steel scrap per year overseas from such countries as the United States, Russia and Japan. ($1=99.12 Yen) (Reporting by Miyoung Kim; Editing by Keiron Henderson)