China: Shagang Steel lifts scrap purchase price by $16/t to secure deliveries

Shagang Group, China’s leading electric arc furnace (EAF) steelmaker headquartered in Jiangsu, has raised its scrap procurement prices by RMB 100/t ($16/t), effective from 23 Mar’22, in an attempt to secure deliveries.

Current prices of HMS (6-10 mm) stand at RMB 3,870/t ($607/t), including 13% VAT, delivered to headquarters. Notably, the company’s scrap purchase bids have hit a 10-month high. Similar levels were last seen in end-May’21.

Factors supporting price hike

• Mills try to secure more scrap deliveries: The wait-and-watch stance adopted by many Chinese scrap traders has resulted in a decline in scrap deliveries to mills. Consequently, some mills have raised their scrap purchasing prices to draw more deliveries to maintain normal production level.
• China’s billet price hike: Steel billet prices in China’s Tangshan rose by RMB 40/t ($6/t) to RMB 4,720/t ($740/t), inclusive of 13% VAT, on 22 Mar’22 as against RMB 4,680/t ($734/t) on 16 Mar’22. Demand for finished steel (both longs and flats) rose, as per a SteelMint report.
• SHFE rebar futures rise: According to SteelMint data, China’s SHFE rebar futures contract for May’22 delivery closed at RMB 4,918/t ($772/t) on 22 Mar’22, a sharp rise of RMB 14/t ($2/t) against RMB 4,904/t ($769/t) on 16 Mar’22.
• Supportive finished steel prices: China’s Shagang Steel has rolled over long steel product prices for late-Mar’22 sales. Currently, rebar (16-25 mm) is at RMB 5,200/t ($816/t), wire rods (6-10 mm) at RMB 5,310/t ($833/t), coiled rebar (8-10 mm)at RMB 5,400/t ($847/t). However, in mid-March, prices rose by $32/t amid bullish global sentiments and the rise in raw material costs.

Outlook
At present, the current market scenario is uncertain due to Covid and logistical problems. It is further expected that prices will fluctuate in the short term.