Posted on 15 Jun 2022
For the first time so far this month, China's leading electric-arc-furnace (EAF) Shagang Group (Shagang) has announced to trim its steel scrap procurement price by Yuan 50/tonne ($7.4/t) effective June 14, in tune with the softening in Chinese steel prices with rebar in particular and with more scrap deliveries to steelworks, according to market sources.
With the latest adjustment, Shagang, headquartered in Zhangjiagang city, East China's Jiangsu, is paying Yuan 3,770-3,830/t for domestically-sourced HMS 80:20 scrap including the delivery and the VAT.
"China's annual college entrance exam that took place last week and the country's ongoing rainy season have slowed down outdoor construction activities in Jiangsu, softening steel demand and thus weighing on steel prices," a Shanghai-based market watcher explained.
For example, as of June 13, the national HRB400E 20mm dia rebar price under Mysteel's assessment had edged down by Yuan 92/t on week to Yuan 4,762/t and including the VAT.
"The softening steel prices had been squeezing the profit margins among domestic steelmakers including Shagang, especially when most of them earned meagre margins or even suffered losses," she said.
On the other hand, Chinese EAF mils recently had little worries about scrap supplies, as "scrap deliveries to steelworks had been on the rise," according to the Shanghai source.
In tandem, scrap deliveries to Shagang's Zhangjiagang steelworks surged by 39.2% on day or 180% on week to 20,203 tonnes/day, according to Mysteel's tracking.
"Although our scrap stocks are rather insufficient, we won't risk stocking up even though there're chances for scrap prices to rebound," a scrap trader in Jiangsu told Mysteel Global, adding that they will closely monitor the domestic steel prices and may be willing to sell more to mills at lower prices, as the rainy season in East and South China may further dampen the steel consumption.
Shagang's latest price cut also impacted the domestic spot scrap market, with the price of 6-8mm common-grade carbon steel scrap in Zhangjiagang losing Yuan 20/t on day to settle at Yuan 3,250/t excluding the 13% VAT by Tuesday morning, according to Mysteel's tracking.
Source:Mysteel Global
