China: Shagang Steel Cuts Scrap Purchase Price by USD 7

After witnessing sharp price hike by about RMB 350/MT (USD 51) in a months’ time, Shagang has cut scrap purchase prices following slowdown in finish steel demand amid growing pessimistic mood in the market.

One of the largest ferrous scrap consumers in east China – Shagang Jiangsu Steel group has cut its domestic scrap purchase prices by Chinese Yuan RMB 50/MT (USD 7). After witnessing price hike of RMB 350/MT in last four weeks’ time, the company has cut its prices amid weak finish steel demand, falling prices in spot as well as export markets and continued production cuts.

As per latest reports, Shagang is now paying RMB 2,640/MT (USD 387) inclusive of 17% VAT for HMS (6-10 mm in thickness) delivered to its headquarter works situated in Zhangjiagang province in China, down RMB 50/MT as against last report of RMB 2,690/MT on 22nd Aug.

In line with this, the steelmaker has also reduced purchase prices for other grades of scrap by RMB 50/MT in the latest price revision. It is paying RMB 2,740/MT (USD 401) for charging scrap 1; RMB 2,720/MT for HMS 1 (thickness not less than 20 mm) and RMB 2680/MT for HMS 2 (6-10 mm). While new prices stand at RMB 2,540/MT and RMB 2,410/MT for melting scrap with specification 4-6 mm and 2-4 mm thickness respectively inclusive of 17% VAT.

Notably, the company witnessed scrap prices surpassing eight months’ high in the last price revision, however, coupled with gradually weakened billet price and transaction rate, steel scrap prices have observed setback in short term.

However, there is no supporting ground for a big fall and steel scrap prices may not witness sharp downturn on longer run. Demand for scrap would remain good as major steel mills continue to reap lucrative profits and in order to increase their revenue will inevitably increase the proportion of steel scrap. On the other hand, environmental protection policy continue to release its power.

“The recent downfall of rebar futures has resulted in pessimistic market sentiments, and steel scrap prices have followed the decline trend slightly; but in the medium and long term, a big decline lacks a solid basis” shared a source.

Shagang Steel is one of the leading steelmakers in China and with an annual production capacity of 31.9 MnT iron, 39.2 MnT steel and 37.2 MnT rolled products.

Domestic scrap purchase prices turn down by USD 4-7/MT – Following Shagang’s lead, few of the leading scrap consuming steelmakers have cut their purchase prices by RMB 30-50/MT (USD 4-7) and many other leading steelmakers in eastern China like Maanshan and Xingcheng are expected cut prices in the near future.

Province-wise domestic scrap reference prices as on 31st Aug’18 –

Source: SteelMint Research; Exchange Rate: 1 USD = 6.83 RMB

Chinese steel market overview – Week 35 : Rebar domestic prices in China also have weakened now by around RMB 50 (USD 7) against beginning of the this week while fell considerably as against last week. Current assessment is heard around RMB 4,380-4,430/MT (ex-works in eastern China).