Posted on 08 Mar 2022
Shagang Group (Shagang), China's leading electric-arc-furnace (EAF) steelmaker headquartered in East China's Jiangsu, has raised its steel scrap procurement prices by Yuan 80/tonne ($12.7/t) effective from March 7, mainly to encourage more deliveries to match its consumption on improving steel margins, according to market sources.
This is Shagang's first price increment after the Chinese New Year holiday in early February. And with the latest adjustment, Shagang is now paying Yuan 3,770-3,830/t for the domestically-produced HMS grade scrap including the delivery and the 13% VAT, according to the company release.
"Although China's new value-added tax policy for scrap just went into effect for less than a week, most domestic steel scrap traders are still holding off selling and won't sell in large quantities," a Shanghai-based market watcher told Mysteel Global.
Prior to Shagang's scrap price increase, scrap deliveries to the steelmaker's Zhangjiagang plants in Jiangsu averaged at a relatively low level of 4,338 tonnes/day as of March 6, down 85.1% on week, according to Mysteel's assessment.
Besides, "the recent strengthening in Chinese steel prices and improving profit margins among domestic steelmakers also encouraged them to maintain their output, and their scrap demand, thus, will stay steady too," the market watcher said.
China's national price of HRB400E 20mmd dia rebar under Mysteel's assessment reached Yuan 4,946/t as of March 4, up Yuan 77/t on week.
China's domestic scrap supply hit the bottleneck for the time being, as reviving demand from steel mills has largely outpaced the volume of scrap new arrivals, according to a supplier in East China's Jiangxi province. "Some scrap traders have to pay more for the new 3% taxation rate to secure adequate resources," he 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 from last Friday to Yuan 3,200/t excluding the 13% VAT as of March 7.
Meanwhile, Shagang's latest price adjustment has also led to some similar price increases among other Chinese steelmakers nationwide, with another 24 mills agreeing to add Yuan 20-100/t onto their scrap procurement prices from March 7.
Source:Mysteel Global
