August saw the use of steel scrap in the melts of China’s blast furnace (BF) steelmakers rise slightly, with the average scrap consumption ratio among the 130 BF steelmakers across China monitored regularly by Mysteel rise by another 0.24 percentage point on month to 15.16% as of August 31 – the highest so far this year.
“In August, some BF steel mills continued to consume more steel scrap, especially when upping the scrap ratio is still marginally more cost-effective than consuming molten iron,” a Shanghai-based market analyst told Mysteel Global.
As of August 31, daily scrap consumption among these 130 BF mills averaged 249,900 tonnes/day, up by a tiny 3,600 t/d from the daily average in July.
“Although the BF mills were keen to introduce as much scrap as possible, actually their scrap consumption last month didn’t show any notable increase, as scrap availability remains limited, given the seasonal supply tightness caused by low sorting rates during summer,” she added.
For example, during August the average scrap consumption ratio among ten mills in Northwest China which Mysteel surveys reversed down by 1.57 percentage points on month after four months of inclines. Survey respondents suggested that partly responsible for this was the second COVID-19 wave that emerged in Xinjiang, a key province in the region, in early August and which brought a lull to local steel market activity.
Besides the three steel mills in Xinjiang, another two mills in adjoining Gansu province were also affected by the lockdown in Xinjiang to contain the spread of the virus, as most of their scrap materials are sourced from Xinjiang, Mysteel Global notes.
Though the lockdown in Xinjiang was lifted late last month, the limited scrap availability forced steel mills to reduce scrap consumption when returning their furnaces to normal production, survey respondents said.
Meanwhile, as of August 31, steel scrap stocks held by the 130 BF mills decreased by 1.4% on month to 2.38 million tonnes, Mysteel’s data shows.
After entering September, Chinese steel mills may again ramp up their production in anticipation of a recovery in domestic steel demand over September-October, traditionally peak steel consumption months. This in turn may lead to the rise in prices of domestically-produced steel scrap too, market participants predicted.
In parallel, scrap prices will continue to gain support from the continuing high price of iron ore, Mysteel Global understands.
As of September 8, Mysteel’s scrap price index had increased by Yuan 74.4/tonne ($11/t) on month to refresh its nine-month high of Yuan 2,625.3/t on delivery, while on the same day, Mysteel’s PORTDEX 62% Fe Australian Fines index rose by Yuan 49/wmt on month to Yuan 966/wmt FOT Qingdao, remaining at its multi-year high. Both prices include 13% VAT.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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