Posted on 10 Jan 2022
Shagang Group (Shagang), China's leading electric-arc-furnace (EAF) steelmaker, has raised its steel scrap procurement prices by Yuan 100/tonne ($15.7/t) effective January 7, or the first scrap price adjustment since the start of 2022 to attract more deliveries when the supply is limited in winter while demand from Chinese steel mills has been steady in general.
With the latest adjustment, Shagang, headquartered in Zhangjiagang city, East China's Jiangsu province, is paying scrap collectors Yuan 3,690-3,750/t for the domestically-produced HMS grade scrap including the delivery and the 13% VAT, according to the company release.
"After successfully achieving the targeted reduction in production in 2021, some domestic mills including Shagang have resumed normal operation in January," a Shanghai-based market watcher commented.
"Apart from maintaining their daily operations, these mills also need to purchase additional tonnage for the upcoming Chinese New Year (CNY) holiday (over January 31-February 6). Thus, they have to pay more if they want more scrap to be delivered to their plants," he added.
As of January 6, scrap delivered to Shagang's Zhangjiagang plant averaged 14,600 tonnes/day, down 13.1% on day or 33.3% on week, according to Mysteel's regular tracking.
However, higher procurement prices from Chinese steel mills may not lead to higher scrap supplies.
"Apart from the seasonal limited scrap availability, some scrapyards and scrap processing companies (in China) have been heard of planning to bring forward their CNY breaks earlier to avoid the traffic jams ahead of the holiday, and this may further reduce scrap supply," the Shanghai analyst explained.
In immediate response to Shagang's price increment, China's spot transaction price of the 6-8mm common-grade carbon steel scrap in Zhangjiagang increased Yuan 50/t on day to Yuan 3,430/t excluding the 13% VAT as of January 7.
Meanwhile, Shagang's latest price adjustment has also triggered a round of similar price increases among steelmakers nationwide, with another 37 mills agreeing to add Yuan 20-100/t onto their scrap procurement prices from January 7.
Source:Mysteel Global
