- China’s scrap supply to stay tight in H2 despite y-o-y rise
- Scrap prices may decline further as finished steel weakens
Mysteel Global: Steel scrap availability in China is expected to remain tight overall in the second half of this year, but supply may climb higher compared with H2 last year, given the rise in scrap generated by the country’s manufacturing sector, Mysteel predicts in its latest report on the market.
China’s total steel scrap supply in H1 this year was around 140 million tonnes (mnt), lower by some 2.5% y-o-y, as the slow progress of real estate and infrastructure projects nationwide had significantly reduced the scrap volumes retrieved from construction sites, Mysteel’s survey showed.
During January-June, the total volume of steel scrap recycled from building sites by the 105 steel scrap processing companies under Mysteel’s tracking dropped by a substantial 43% compared with the same period last year.
For the coming six months, the construction sector will probably remain the key bottleneck for steel scrap supply in China. However, part of the scrap shortfall from this sector will likely be offset by the increasing generation from manufacturing industries. This is because demand for product renewal is growing rapidly across key markets such as the machinery, automotive, and home appliance sectors.
During January-May, for example, the 85 automotive scrapping and dismantling firms in China under Mysteel’s tracking had shredded some 168,100 end-of-life vehicles (ELVs), higher by a marked 5-6% y-o-y.
In addition, in the energy sector, the large-scale renewal of wind-power equipment and the rising installation of new photovoltaic capacity will also contribute to steel scrap generation, according to the report.
Building on this trend, Mysteel estimates that China’s domestic steel scrap supply during July-December this year will reach approximately 115 mnt, reflecting a modest 1% y-o-y increase.
“(Scrap) import activities will have a minimal impact on overall scrap fundamentals in China, as the high costs and regulatory barriers will keep steel scrap import volumes at low levels for the remainder of this year,” the report added.
China’s total imports of ferrous scrap are likely to hover around 100,000 tonnes (t) this half, down by some 39% y-o-y, Mysteel assessed.
On the other hand, domestic steel scrap demand in H2 is expected to be slightly higher y-o-y, lifted by more active production among both electric-arc-furnace (EAF) and blast furnace (BF) steelmakers.
The average capacity utilisation rate among the 90 independent EAF mills during January-June this year was 47%, higher by 1 percentage point y-o-y, while that of the 247 domestic BF mills Mysteel tracks was also higher by 3 percentage points y-o-y at 88-89%.
Consequently, China’s steel scrap market will remain tightly balanced during the present half, Mysteel Global noted.
However, the country’s steel scrap prices are seen falling further in H2 in tandem with the weakening prices of finished steel products, Mysteel predicts.
During January-June, China’s national composite steel scrap price averaged RMB 2,466/t ($344/t), including the 13% VAT, down by a significant 16% y-o-y, according to Mysteel’s assessment.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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