China: Shagang Steel hikes scrap purchase price for the second time in Jan’21

Eastern China’s largest EAF mill – Shagang steel hiked scrap purchase price for all grades today by RMB 150/t ($23). As per company’s new revision, scrap price for HMS (6-10 mm) stands at RMB 3,250/t ($501), inclusive of 13% VAT, delivered to headquarters. While price of other grades including HMS (10-20 mm) thickness stands at RMB 3,280/t ($505) and HMS (not less than or equal to 20 mm) thickness stands at RMB 3,310/t ($510). 

This is the highest price since Oct’17, as per data maintained with SteelMint. Supply tightness amid seasonal issues, high utilization rates for electric arc furnaces (EAFs) and higher imported scrap prices boosted scrap prices.

• China’s new scrap import policy influences domestic scrap market – Increase in Chinese scrap imports has come amidst high domestic finished steel prices.  Thanks to Chinese traders, Japanese scrap export market remained active during last week. 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. However, fresh offers are heard close to $500-505/t CFR levels. Japanese scrap export market awaits monthly Kanto scrap export tender, which is likely to be trendsetter for rest of the month 
• Restocking ahead spring festival – Chinese mills are expected to remain active in restocking scrap ahead of spring festival holidays scheduled in mid-Feb’21 
• Higher iron ore prices on falling portside inventories – Chinese spot iron ore fines (Fe 62%) prices opened at $164.5/t, CFR last week and increased to $171.75 towards the weekend. Iron ore prices strengthened further on robust buying interest. As per data compiled by SteelHome consultancy, iron ore inventory at major Chinese ports fell to 124.25 mn t as against at 126.75 mn t assessed a week ago 
• Chinese steel prices remain supported – Billet prices in the Tangshan market (northeast China) have increased to RMB 3,810/t ($587) including 13 % VAT. Prices have increased by RMB 70/t w-o-w. 

Shagang Steel has raised its construction steel prices today by RMB 50/t. Prior to this it had raised prices by RMB 150/t in early Jan’21. The revised price for rebar HRB 400 (16-25 mm) stands at RMB 4,700/t 

Outlook – The operating cost of steel enterprises remains at a high level. Uncertainty in scrap supply and transportation may rise scrap prices this week within a range of RMB 50-100/t.