Over the past month, domestic scrap prices have generally held firm, with Mysteel’s scrap price index increasing by Yuan 30.7/tonne ($4.4/t) on month to Yuan 2,542.1/t on delivery and including the 13% VAT as of July 31, Mysteel’s data shows.
“I don’t think the domestic scrap market will decline to any great extent, given the recovery of finished steel demand after the rainy season and the fact that raw materials prices are higher,” a Shanghai-based scrap analyst said. “However, it will be hard for scrap to rise markedly this month, as prices currently are staying high and therefore continue to squeeze steelmakers’ profit margins,” she predicted.
Last month some mills consumed more steel scrap to take advantage of the stable scrap prices. However, the faster pace of growth in scrap prices compared with rebar saw the price spread between scrap and rebar remain stable at Yuan 1,271.5/t as of July 31, nudging up by a tiny Yuan 3.5/t on month, according to Mysteel’s database.
The continuous increase in scrap prices has shaved the steel mills’ margins, especially those of independent electric-arc-furnace (EAF) producers, forcing some makers to reduce or halt production to cut costs, Mysteel Global noted.
In tandem, capacity utilization among 71 EAF steelmakers across China under Mysteel’s regular survey reached 58.54% as of July 30, down by 1.83 percentage points on month or 7.7 percentage points on year.
On the other hand, as the scope for any further increase in scrap prices seems limited, scrap traders will probably be cautious in lifting their prices and seek to grab any opportunities of sales.
“We are now doing ‘fast-in’ and ‘fast-out’ business as market prices of scrap haven’t seen any remarkable changes for some time,” a scrap trader in East China’s Jiangsu province told Mysteel Global.
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