China: Shagang Steel further lowers scrap purchase prices by $8/t

China’s leading electric arc furnace (EAF) steelmaker, Jiangsu Shagang Group, cut its scrap purchase prices for the eighth time since end-Oct’21. The steel producer reduced its scrap procurement prices by RMB 50/tonne (t) ($8/t) for all grades with immediate effect, sources informed.

Current prices of HMS (6-10 mm) stand at RMB 3,370/t ($528/t), including 13% VAT, delivered to headquarters.

Scrap demand from the Chinese mills remained negatively impacted due to low consumption of the material and fall in steel prices, SteelMint notes.

Factors behind price cut  

• China spot iron ore prices continue to head south: Prices of the Chinese spot iron ore fines Fe62% opened at $93.85/t CNF China for the week but decreased to $89.75/t, CNF China towards the weekend. However, mid-week, prices had rebounded to $94.2/t. Demand from Chinese end-users is low due to the ongoing steel production curbs and stricter sintering and blast furnace operation restrictions in the northern stretches of China. Previously, when steel margins and coke prices were high, mills were using high-grade ore and direct blast furnace feed such as pellets and lumps.
• China’s steel billet prices fall by RMB 160/t: Steel billet prices in China’s Tangshan witnessed a sharp d-o-d fall of RMB 160/t ($25/t) on 12 Nov’21. Billet prices stood at RMB 4,290/t ($672/t), inclusive of 13% VAT. This decline dragged down the scrap procurement offers.
• Shagang Steel reduces rebar prices by RMB 450/t: Shagang Steel cut construction steel prices for mid-Nov’21 sales. Currently, prices of rebar (16-25mm) stand at RMB 5,100/t ($799/t), down by RMB 450/t ($70/t) compared to the beginning of this month.
• Rebar futures continue downtrend: According to SteelMint data, China’s SHFE re-bar futures contract for Jan’22 delivery closed at RMB 4,249/t ($666/t) on 12 Nov’21, a significant drop of RMB 194/t ($30/t), d-o-d.

Outlook
In recent times, when finished steel prices are declining on limited demand, scrap prices will likely continue declining in the short term.