Posted on 21 Jun 2022
Shagang Group (Shagang), a leading electric-arc-furnace (EAF) steelmaker in China, has cut its steel scrap procurement prices for the third time this month, clipping another Yuan 100/tonne ($14.9/t) off all grades of scrap supplies effective June 19, in response to bearish market sentiment with the persistent weakening in both steel prices and demand.
The mill, headquartered in Zhangjiagang, East China's Jiangsu province, has reduced its buying prices by a total of Yuan 200/t since June and is paying Yuan 3,670-3,680/t for domestically-produced HMS grade steel scrap including both the delivery and the VAT, according to the company's announcement.
Shagang's announcement saw the spot price of the 6-8mm common-grade carbon steel scrap in Zhangjiagang down by another Yuan 220/t from last Friday to Yuan 3,000/t excluding the 13% VAT as of Monday morning, or a new low since December 15 2021, according to Mysteel's assessment.
"The frequent downward adjustments we've seen Shagang make in its steel scrap buying prices correlate strongly with the recent plunges in Chinese finished steel prices," a Shanghai-based steel analyst said.
"And the price slumps have largely eroded the profitability of domestic steel mills, forcing them to shift the burden to raw material suppliers by lowering their replenishment prices further," she added.
As of June 17, China's national price of HRB400E 20mm dia rebar under Mysteel's assessment had decreased by Yuan 238/t on week to Yuan 4,583/t and including the 13% VAT, or a new low since late February 2021.
"Moreover, EAF makers in many regions have already been suffering losses of around Yuan 150/t when selling steel products, forcing them to slow down production. The weakening demand is likely to soften Chinese scrap prices further," she predicted.
In the meantime, China's traditional low season for steel consumption because of the high summer temperatures and frequent rainfalls in many regions will affect the normal operation of outdoor construction works, resulting in softening steel demand and thus decreasing mills' daily scrap consumption and further weakening the scrap market, according to her.
On the other hand, the frequent reductions in scrap prices also encouraged some traders to speed up their pace of delivery to mills to avoid further price declines.
It's no surprise that as of June 19, scrap deliveries to Shagang's Zhangjiagang steelworks have maintained a relatively fast pace of 18,503 tonnes/day on average, Mysteel's tracking showed.
Source:Mysteel Global
