China’s largest EAF steelmaker, Jiangsu Shagang Group, announced a cut in its scrap purchase prices today, 26 Oct’21. The steel producer decreased its scrap procurement prices by RMB 50/tonne (t) ($8/t) for all grades, with immediate effect from today, sources confirmed.
After the latest round of revision, prices of HMS (6-10 mm) stand at RMB 3,730/t ($584/t), including 13% VAT, delivered to headquarters.
This is the third price cut announced by the company so far this month. Market sources understand this as an effort by the steelmaker to further lower its production costs in line with softening domestic steel prices.
Another major reason behind the decline in scrap purchase prices was availability of adequate scrap inventory with steel mills owing to which they are not active in procurement currently, SteelMint learnt.
Factors behind drop in prices
- Decreasing domestic steel prices: The recent declines in domestic steel prices have squeezed steel profit margins of almost all Chinese steelmakers due to which they have lowered bids for scrap purchase.
- China’s billet prices decline towards weekend:Steel billet prices in China’s Tangshan declined sharply by RMB 260/t ($41/t), w-o-w towards closing of last week. Domestic billet prices stood at RMB 4,990/t ($781/t) towards the weekend, inclusive of 13% VAT.
- Fall in rebar futures: Due to weak demand in the domestic market, China’s rebar futures contract for Jan’22 delivery on the Shanghai Futures Exchange (SHFE) closed yesterday (25 Oct’21) at RMB 4,825/t ($755/t), a drop of RMB 75/t ($12/t) against the closing of last week. SteelMint understands.
Outlook
With declining finished steel prices and adequate availability of scrap, it is expected that scrap prices will remain weak in the short-term.
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