China: Shagang Steel hikes scrap purchase price on limited supply

• Shagang Group has announced a price hike by RMB 80/t ($12) for all grades
• This is the first price adjustment in 2021 and is aimed at attracting more deliveries
• Baowu Steel Group has launched a steel scrap processing plant 
• It is expected that the scrap price may continue to be strong with fluctuations in the short term considering Chinese comeback

China’s largest EAF steelmaker – Shagang Group has announced a price hike today (6th Jan’21) by RMB 80/t ($12) for all grades. The purchase price of HMS (6-10 mm) thickness stands at RMB 3,100/t ($480), inclusive of 13% VAT delivered to headquarters at Zhangjiagang North of Shanghai.

This is the first price adjustment since the beginning of 2021 and is aimed at attracting more deliveries when the supply is rather limited during winter months while demand from the Chinese steel mills has been steady in general. 

Prices of other grades including HMS (10-20 mm) thickness stands at RMB 3,130/t ($484) and HMS (not less than or equal to 20 mm) thickness stands at RMB 3,160/t ($489) 

 Reasons resulting in scrap price hike –

• Resumption of scrap import bookings after roll out of new policy – Imported scrap bookings in China have regained momentum after Government lifted restrictions on few grades of scrap. A Chinese scrap trader has concluded a deal of 3,000 t of Japanese HS grade scrap. The deal was heard to have been concluded at $485/t CFR China basis as it was negotiated before the New-Year holidays. However, now the imported scrap price to China is expected to go up further by $15-20/t.
  
  China’s largest steel producer Baowu Steel Group has launched a steel scrap processing plant with an annual capacity of 2.8 mn t in Anhui province. This facility has been termed as a ‘lights out factory’ – meaning unmanned production– in the metals recycling industry
  
• Tighter domestic scrap supplies – In East China, the scrap purchase price has been increased due to high price of finished steel. However, scrap suppliers are not active in sales due to shortage of scrap
  
• Spot iron ore prices move north – Spot iron ore Fe 62% fines price rose yesterday by $2.65 and stood at $167.15/t CFR China with a monthly average standing at $165.83/t, supported by firm buying interest for both Australian and Brazilian mid-grade fines. DCE iron ore futures fluctuated yesterday and moved down on low inventory levels
• Chinese domestic billet prices rise w-o-w – Billet prices in the Tangshan market (northeast China) have increased by RMB 30 w-o-w. The prices of commonly traded Q235 billet 150mm diameter were reported yesterday at RMB 3,800/t ($588) in Tangshan, including 13 % VAT 

 Outlook – Steel mills have increased scrap purchase prices and suppliers are bullish. It is expected that the scrap price may continue to be strong with fluctuations in the short term.