China: Shagang Steel lowers scrap purchase prices by $8/t, sixth cut in a row

China’s leading electric arc furnace (EAF) steelmaker, Jiangsu Shagang Group, cut its scrap purchase prices for the sixth time since 22 Oct’21. The steel producer reduced its scrap procurement prices by RMB 50/tonne (t) ($8/t) for all grades, with immediate effect, sources confirmed.

With this cut, the current prices of HMS (6-10 mm) stand at RMB 3,470/t ($542/t), including 13% VAT, delivered to headquarters.

Scrap demand of Chinese mills has been impacted by steel production curbs and a weak outlook. Some steel mills are facing production restrictions and electricity rationing, so the demand for scrap remains low, SteelMint notes.

Factors behind the price cut

• Chinese billet prices drop further: Steel billet prices in China’s key steel producing hub of Tangshan fell by RMB 250/t ($39/t) w-o-w to RMB 4,650/t ($727/t), inclusive of 13% VAT, according to data maintained with SteelMint.

• Chinese rebar futures continue downtrend: According to data maintained with SteelMint, China’s SHFE rebar futures contract for Jan’22 delivery closed at RMB 4,247/tonne (t) ($664/t) on 5 Nov’21, witnessing a sharp decline of RMB 399/t ($62/t), w-o-w.
• Drop in crude steel output amid announced cuts: According to China Iron and Steel Association (CISA) data, the average daily crude steel output of key enterprises was at 1.73 mn t in late-Oct’21, a decrease of 139,400 tonnes or 7.43% from the previous month. Average daily steel production in late-October decreased by 19.53% y-o-y.
• Drop in iron ore prices: Price of other key steel making raw material also witnessed a decline. Chinese spot iron ore prices dropped on weak demand. Prices of fines Fe 62% opened at $103.3/t CNF China last week but decreased to $92.75/t, CNF China towards weekend on weaker Chinese demand outlook in winter.