Posted on 11 Mar 2021
Although China has begun importing ferrous scrap after revoking import restrictions, the import trade is still not profitable, says Hu Hongsheng, director of the scrap research department at Fubao Information Company.
Since Baosteel's raw material purchasing subsidiary ordered the first batch of imported scrap from Japan, more than ten import transactions have been confirmed. Most of these transactions are from Japan, because the country is nearby, making the delivery period shorter, and Chinese buyers are more familiar with Japanese sellers. Chinese buyers want to buy more scrap from other markets, but they are not familiar with foreign suppliers, Hu noted at the Kallanish International Steel Scrap conference on Wednesday.
In the completed transactions, Chinese buyers paid higher prices than in both the Chinese domestic market and other key markets. Kallanish assessed the Chinese heavy scrap price on Wednesday at CNY 3,356/tonne ($515/t) delivered to mills in the Yangtze River Delta. A market source said earlier this week that import offers for heavy scrap were at about $480/t cfr China. With the addition of the 13% value-added tax, the import price remains higher than the domestic price.
Chinese buyers are testing the inspection process at Chinese ports with small batches of goods. Only recycled steel raw materials that meet China's new standards are allowed to be imported. Customs authorities will inspect the non-metallic inclusions of imported scrap to ensure its quality, and have imposed stricter requirements than for common grades such as HMS.
At the same time, because Chinese steel mills have purchased scrap with inconsistent standards in the past, the specifications accepted by different steel mills do not match international standard specifications.
Hu said the scrap grades currently acceptable to Chinese buyers are mainly China's HRS and MRS, and Japan's H2 or HS. HMS may not be welcomed by Chinese buyers due to the stricter Chinese standards, though this does not mean that it will not be imported in the future. The market must wait for more import transactions to determine how Chinese Customs will assess import cargos in practice.
The strict import standards and unprofitability of import trade will be the two major factors restricting China's scrap imports for now. However, Hu estimates that China's scrap imports in 2021 will reach at least 2 million tonnes. Considering the scale of China's domestic market, this will not have a significant impact on the domestic supply and demand balance.
Source:Kallanish
