Posted on 07 Jan 2022
December saw steel scrap utilization in crude steel produced by the 211 Chinese steel mills Mysteel regularly samples edge down further on month, dipping by another 1.14 percentage points, new data show, to average 22.73%. This was also significantly lower than last year's high, reached in May, of 27.13%, Mysteel Global notes.
The survey canvasses integrated and electric-arc-furnace (EAF) producers, as well as those mills using both blast-furnace (BF) and EAF technologies, and the fall last month was attributed to the decrease in usage among EAF mills.
As of end-December, these 211 surveyed mills held 6.82 million tonnes of steel scrap in inventory, some 11,700 tonnes higher on month. Their total steel scrap consumption last month remained largely stable at 2.71 million tonnes in total, nudging down by 8,700 tonnes from November, according to Mysteel's assessment.
Among the total, scrap utilization in crude steel output among the 57 EAF mills in the survey averaged 96.32% last month, or equivalent to about 736,400 tonnes of steel scrap in total, which was 12.4% or 104,600 tonnes lower than in November.
Throughout last December, the seasonal supply tightness of steel scrap, plus some mills' demand for additional scrap tonnage to tide them through winter and for the upcoming Chinese New Year holiday, lent some support for China's domestic scrap market, with Mysteel's steel scrap price index increasing by Yuan 300/tonne ($47.1/t) on month to Yuan 3,562.3/t on delivery and including the 13% VAT as of December 31.
On the other hand, the falloff in steel demand in winter saw China's national price of HRB400 20mm dia rebar decrease by Yuan 48/t on month to Yuan 4,726/t and including the 13% VAT by December 31.
The increase in steel scrap prices when finished steel prices are weakening squeezed the profit margins of some steel mills, especially those of the EAF producers, forcing them to reduce their output accordingly. This led to the decrease in their scrap consumption, Mysteel Global noted.
For the 130 mills in the sample only hosting BFs, their scrap use in steel output remained largely stable at 15.79%, nudging down by 0.25 percentage point on month.
Among the remaining 24 mills with both BFs and EAFs, scrap utilization in crude steel output among them averaged 24.21%, up by a tiny 0.17 percentage point on month, Mysteel's survey showed.
The lower scrap usage ratio last month will have disappointed the central government which last December 29, had issued a five-year guide spanning 2021-2025 for developing the country's industrial commodity sectors, as Mysteel Global reported.
In the guideline, the government emphasized that it was encouraging the establishment of large recycling and processing bases or industrial clusters for several commodities including steel scrap, and stressed that by 2025, the ratio of steel scrap used in crude steel should reach 30% - far above the December ratio.
Source:Mysteel Global
