China: Shagang Steel hikes scrap purchase prices on tighter supply, higher steel prices

China’s leading electric arc furnace (EAF) steelmaker, the Jiangsu Shagang Group, raised its scrap purchase prices by $16/t today. Notably, this is the first hike after a total of 10 continuous price cuts post-12 Oct’21.

This price rise is due to the tight availability of scrap. Secondly, there is a sudden rise in demand for scrap on supportive steel prices.

The steel producer raised its scrap procurement prices by RMB 100/tonne (t) ($16/t) for all grades with immediate effect, sources informed SteelMint.

Current prices of HMS (6-10 mm) stand at RMB 3,340/t ($525/t), including 13% VAT, delivered to headquarters.

Factors behind the price hike  

• China’s steel billet prices rise by RMB 130/t m-o-m: Steel billet prices in China’s Tangshan witnessed a sharp rise of RMB 130/t ($20/t) on m-o-m basis as against RMB 4,180/t ($657/t) on 16-Nov’21. Billet prices stood at RMB 4,310/t ($677/t) on 10 Dec’21, inclusive of 13% VAT. The rising rebar futures prices have led to increase in the prices of steel billets into the country.

• China’s domestic rebar prices rise m-o-m: The country increased domestic rebar prices m-o-m in Dec’21. Currently, prices of rebar (16mm, HRB400Emm) stand at RMB 5,040/t ($792/t), up by RMB 360/t ($56/t) compared to the prices on 19-Nov ’21. Strong demand from end-users along with bullish sentiments led to a hike in rebar prices.
• China spot iron ore prices up: Prices of the Chinese spot iron ore fines Fe 62% closed last week at $103/t CNF China, increasing m-o-m to $16/t, CNF China from $87/t on 19-Nov’21, as per data maintained by SteelMint. The uncertainty caused by wet weather conditions in Australia continued to support prices. However, a few sources feel the demand for medium-grade fines may remain muted on limited procurement activity from steel mills that preferred staying on the sidelines.
• Rebar futures shows uptrend: According to SteelMint data, China’s SHFE re-bar futures contract for May’22 delivery closed at RMB 4,322/t ($679/t) on 10 Dec’21, a significant rise against RMB 4,163/t ($654) on 30 Nov’21.

Outlook
It is expected that scrap prices are less likely to fall and may see some volatility or remain strong in the near term.