China’s domestic steel scrap market has posted a price gain of around 10%, or RMB 236/t, over the past three months amid gain in iron ore prices and stable demand from EAFs and BFs.
Mainstream steel mills are at present purchasing at an average price of RMB 2,602/t for HMS 6mm and higher grades, up by 1.02% from levels seen in early July and higher by 14.67%, or RMB 333/ton, from 2020 lows posted on April 10.
Since scrap competes with iron ore in the converter burden of BFs, sharp increases in imported ore prices over the past few weeks have supported scrap prices too.
Scrap prices may gain another RMB 10-30/t in the short-term if iron ore prices maintain the upward momentum.
Scrap supply is currently tight as producers have not pushed too much material into the market while some disruptions to logistics linger due to coronavirus control measures. While EAF operating rates have started to fall in the last few days due to lower rebar prices, it has not impacted scrap demand so far with ample scrap sales.
However, scrap prices may be pressured when steel mills start annual maintenance in August.
Mill stocks of 61 mainstream steel mills across China was 2.45 mn t as of July 17, up by 117,600 to w-o-w, equivalent to 11 days of consumption.
Stock levels over the past two months have averaged at 10 days of consumption compared with 20 days at the end of 2019, which indicated further room for increase in scrap demand.
Mills have so far not significantly stepped up stocking of scrap after the lockdown was lifted in March. Weekly average stock in Jun-Jul was at 2.33 mn t compared with the weekly average stock of 2.21 mn t in Mar-May.
Operating rate of 71 mainstream EAFs across China was 67.52% in the week to July 17, down by 5.69% w-o-w, while the capacity utilization rate was 52.61%, down by 4.44% w-o-w. Both sets of data have fallen for four weeks in a row as some EAF mills chose to cut production in a bid to shore up prices amid fall in rebar prices that have squeezed EAF margins.
Daily delivered scrap to 61 key steel mills was 3,441.83 tons, up by 18.55% w-o-w, while daily consumption was 3,170.83 tons, up by 1.8% w-o-w.
Photo Credit: World Steel
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