China’s Shagang hikes scrap purchase prices for second time in Jun’21

China’s largest electric-arc furnace (EAF) steel maker, the Jiangsu Shagang Group, announced its second round of price hikes for scrap purchases for Jun’21. The company increased scrap procurement prices by RMB 80/tonne (t) ($13/t) for all grades, effective from today (16 Jun’21). After the revision, current prices for HMS (6-10 mm) stand at RMB 3,770/t ($589/t), inclusive of 13% VAT, delivered to headquarters.

Prices for other grades, like HMS 10-20 mm, are at RMB 3,800/t ($594/t) and  HMS not less than or equal to 20 mm thickness, at RMB 3,830/t ($598/t). Tight material availability and rising prices of finished steel have lifted the scrap purchase prices.

Last week, the steel maker had raised bids by RMB 100/t.

Reasons for hike in scrap purchase prices

• Lower scrap deliveries:- Shagang raised bids to secure scrap volumes for its plant amidst lower deliveries.
• Imported scrap offers further up:- Bids by Chinese steel mills for Japanese HRS 101 grade ferrous scrap moved up further by $15-20/t, w-o-w, SteelMint learnt from sources. Currently, bids for Japanese HRS 101 are at $535-540/t, CFR. However, no recent deals have been heard by SteelMint. Indicative offers of the same are at $560/t, CFR.
• Iron ore spot prices range-bound:- Iron ore prices in the spot market remained range-bound on consistent buying interest for mainstream medium-grade fines amidst supply concerns. The price of Fe 62% fines was assessed at $222.35/t, CFR China, on 15 Jun’21. The iron ore futures market remained bearish on dull seasonal demand with DCE’s most-traded Oct’21 contract closing at RMB 1,225.5/t.
• Chinese domestic billet prices up: – Domestic billet prices in China rose by RMB 50/t ($8/t) on 15 Jun’21 as compared to last weekend, owing to further increase in steel futures. Prices of the commonly traded Q235 billet (150 mm) were reported at RMB 5,060/t ($791/t) in Tangshan, including 13% VAT.

• Ferrous futures drop on dull seasonal demand:- Iron ore and steel futures in China dropped by 2.5% on 15 Jun’21 after the market opened post-the Dragon Boat Festival holidays. The fall in futures is attributed to weak downstream demand amidst declining steel prices due to output curbs in Tangshan. Rebar futures Oct’21 contracts on the Shanghai Futures Exchange (SHFE) closed at RMB 5,168/t ($807/t), down by RMB 154/t ($24/t).