China’s largest electric arc furnace (EAF) steelmaker, Shagang Steel, reduced its scrap procurement prices on 16 May’21 by RMB 50/tonnes (t) ($8/t) for all grades. Currently, the company is paying RMB 4,140/t ($643/t), inclusive of 13% VAT for HMS (6-10 mm), delivered to headquarter works at Zhangjiagang, north of Shanghai.
Prices for other grades, such as HMS 10-20 mm thickness, stand at RMB 4,170/t ($648/t) and HMS not less than or equal to 20 mm thickness are at RMB 4,200/t ($652/t). The company has decreased its scrap prices for the first time in May after four consecutive hikes in the past two weeks.
Factors behind price cut
- Fall in Chinese billet prices: Chinese domestic billet prices fell significantly towards the end of last week. On 14 May’21, billet prices witnessed a significant fall of RMB 150/t ($23/t), day-on-day (d-o-d). The price of the commonly traded Q235 billet of 150mm diameter was reported at RMB 5,670/t ($881/t) ex-Tangshan, including 13% VAT.
- Steel futures continue to head south: The SHFE rebar futures Oct contracts fell on 17 May’21 further by RMB 45/t ($7/t) and closed at RMB 5,596/t against the 14 May’21 close.
- Spot iron ore prices fall $24/t on cautious buying: Spot iron ore Fe 62% fines price witnessed the biggest loss in a single day, plunging by $23.75/t to $209.35/t CFR China towards the close of last week. Chinese steel prices have fallen since 13 May’21, as the previous sharp rise saw buyers backing off, sources said. The retreat in steel prices dragged down prices of steel-making raw materials, including iron ore. It is expected that iron ore prices may hover around high levels.
- Disparity in imported Japanese scrap offers: Japanese scrap offers for HRS 101 grade climbed further by around $40/t. These are now being offered at $580/t CFR China basis, SteelMint learnt from sources. However, bids are still heard to be at around $535/t CFR China levels.
China’s Anyang Steel and Shagang Steel plan mixed-ownership reform
China’s Anyang Iron and Steel Group has signed a letter of intent with the country’s top steelmaker, Jiangsu Shagang Group, to conduct a mixed-ownership reform, in a bid to further consolidate the ferrous sector in the world’s top steel producing country. The move comes as China calls for further consolidation of the steel sector, aiming to put 60-70% of the production in the hands of its top 10 steelmakers by 2025 from the present less than 40% . Anyang Steel has an annual production capacity of 10 mn t per annum.
Outlook
Due to environmental protection restrictions, steel mills are not active in inventory replenishment and it is expected that scrap prices may remain stable in the short term.
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