China’s largest EAF steelmaker, the Jiangsu Shagang Group, announced a sharp rise in its scrap purchase prices on 28 Sept’21, after opting for a price cut two weeks earlier.
The steel producer has raised its scrap procurement prices by RMB 50/tonne (t) ($8/t) for all grades, with immediate effect from 28 Sept’21, sources confirmed.
After the latest round of revisions, prices of HMS (6-10 mm) stand at RMB 3,760/t ($583/t), inclusive of 13% VAT, delivered to headquarters.
Factors behind the rise in prices
- Restocking ahead Chinese holidays: The National Day holidays are round the corner, starting from 1 Oct’21 till 7 Oct’21. Most steel mills are trying to replenish their scrap inventories before the onset of the holidays. Against the backdrop of steel production cuts in China and tight scrap availability, Chinese scrapyards are experiencing uncertain stock levels at present and traders are in a wait-and-watch mode due to bullish market sentiments.
- Tighter scrap deliveries: Both production and consumption of scrap have reduced due to power cuts in Chinese mills which is another factor supporting the price hike.
- Supportive steel prices: One of China’s key steelmakers, Jiangsu Shagang Steel, has increased re-bar prices by RMB 150/t ($23/t) for late-Sept’21 sales. Higher profit margins amongst steel mills have supported hike in bids for scrap purchase.
- Iron ore spot prices increase: The spot price of iron ore Fe 62% fines rose slightly by $1.25/t to $110.15/t CFR China this week, as per reports. Some market players continued to identify purchasing opportunities at current prices, which supported iron ore prices. Deals in medium-grade fines enhanced the spot market, resulting in a hike in prices.
Outlook
It is expected that scrap prices will remain stable, but tend to be strong in the short-term as mills are actively restocking.
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