Over 60 China steelmakers clip steel scrap buying prices

Posted on 25 March 2021

Over 60 steel mills across China including both blast furnace and electric-arc-furnace (EAF) producers have pared their steel scrap procurement prices by Yuan 20-200/tonne ($3-30.6/t) over the past week on hopes of loosening supplies, according to Mysteel's tracking, and the cuts are also their response to the curbs on steel operations in Tangshan of North China’s Hebei province and higher scrap deliveries to mills out of Hebei recently.

Steelmakers in Tangshan have been seriously impacted by the recent frequent production restrictions demanded of them by the city government to reduce local air pollution, as Mysteel Global has reported.

Consequently, the rather strict production curbs will likely cause daily steel scrap consumption among Tangshan’s steel mills to decrease by around 8,000 tonne/day, according to Mysteel’s assessment. The Tangshan steelmakers had been consuming an average of 81,000 t/d of scrap in early March before the restrictions were imposed.

“We usually consume about 3,000 t/d of steel scrap after the Chinese New Year holiday in February, but these days, after the rounds of restrictions, our daily scrap usage has decreased by one-third to 2,000 t/d,” an official from a steel mill in Tangshan explained.

A scrap trader in Hebei province was unhappy after just delivering some scrap to a steel mill two days ago. “Unfortunately, the steelmaker clipped their scrap buying prices by Yuan 50/t before our scrap arrived at the works. We don’t know what to do with the rest of steel scrap stocks we have at hand,” he admitted.

Noting the weakening demand for their materials from Tangshan steel mills, some scrap traders have stopped delivering scrap to Tangshan, and in turn are trying to sell their products to steel mills outside Hebei, chasing customers in East China’s Jiangsu and Shandong provinces in particular, Mysteel Global noted.

“Most of my cooperative steel mills are based in eastern parts of China, so the impact of the Hebei curbs seems to be limited for now,” a Jiangsu-based scrap trader remarked. “However, as the eastern regions have become major areas for scrap generation and processing, I’m afraid that the uptick in supply will largely outpace the rate of scrap consumption, and so lead to further price decreases in the near term,” he predicted.

As of March 23, steel scrap deliveries to 15 steel mills across China which Mysteel monitors averaged 6,833 t/d, up 3% on day or 15.4% on week, another survey showed.

However, scrap industry insiders also warn that market participants should not worry too much about the recent downward trend in prices, as the healthy profit margins some EAF producers are enjoying on their finished steel products will encourage them to ramp up production. The robust demand for scrap that this is likely to produce should lend some support to domestic scrap prices.

“We have learned that apart from the steel mills in Hebei, others around the country can enjoy margins above Yuan 350/t on producing steel, which is very profitable for them,” a Shanghai-based market watcher said. “Some EAF mills tend to keep producing, even when they are at break-even, let alone when they can earn a lot. So from this perspective, my guess is that any decrease in domestic scrap prices will be limited,” she observed.

As of March 23, Mysteel’s steel scrap price index had edged down by Yuan 17.6/t on week to Yuan 3,247.6/t on delivery and including the 13% VAT, the database showed.

Source : Mysteel Global