Posted on 13 Jul 2022
The latest scrap price cut of Yuan 150/tonne ($22.3/t) on July 12 by Shagang Group (Shagang), China's leading electric-arc-furnace (EAF) steelmaker, or the ninth time since June 14, was interpreted by domestic market sources as the timely reflection of continuous softening in the country's finished steel prices due to lukewarm steel demand.
Shagang, headquartered in Zhangjiagang, East China's Jiangsu province, has trimmed its scrap procurement prices by a total of Yuan 720/t over the period. And with the latest cut, it is paying Yuan 3,100-3,160/t for domestically-sourced HMS 80:20 scrap including the delivery to the mill and the 13% VAT.
Shagang's latest price cut has been more to reflect the weakening in Chinese spot steel prices than its usual 10-day pricing policy, commented a Shanghai-based market watcher close to the steel producer.
"The recent decline in Chinese steel prices has also further eroded the profitability of domestic steel mills, prompting them to shift some of the burden to raw material suppliers by cutting their raw material procurement prices," he added.
As of July 11, China's national average price of HRB400E 20mm dia rebar under Mysteel's assessment decreased to Yuan 4,180/t and including the VAT, or a new low since December 2020. Prior to today's price reduction, Shagang had rolled over the list prices of its major steel products for mid-July sales, as reported.
Shagang's latest scrap price adjustment was also in line with the overall bearish market sentiment amid weak downstream steel demand.
"The extremely hot weather across China recently has slowed down the progress of outdoor construction activities, and sporadic COVID-19 cases reported in some cities have also affected steel demand," a Shanghai-based analyst said.
Despite the recent price cuts, scrap delivery to Shagang's Zhangjiagang steelworks has persisted at a rather high level of 18,400 tonnes/day, and this has freed the steelmaker from any supply concerns in the near term.
In response to Shagang's latest price cut, spot scrap prices in Zhangjiagang under Mysteel's tracking declined too by Tuesday morning, with that of 6-8mm common-grade carbon steel scrap down Yuan 100/t on day to Yuan 2,670/t excluding the 13% VAT, or a new low since January 2021. And another 87 Chinese steelmakers had also cut their scrap buying prices by Yuan 20-300/t, Mysteel's survey suggested.
Source:Mysteel Global
