Shagang Steel, the largest steel enterprise in Jiangsu Province, in east China, lowered its scrap buying prices by RMB 100/tonne ($16/t) for all the grades on 20 May’21. The current price for scrap HMS of 6-10 mm thickness stands at RMB 3,960/t ($615/t), inclusive of 13% VAT, delivered to its headquarters at Zhangjiagang, located in the north of Shanghai. This is the company’s third price cut announced this week.
A sharp drop in domestic steel prices amid plunging steel futures along with lower bids for imported scrap have kept bids for domestic scrap under pressure, SteelMint notes.
Meanwhile, the price for other grades, like HMS 10-20 mm , stands at RMB 3,990/t ($620/t) and that of HMS not less than or equal to 20 mm thickness is at RMB 4,020/t ($624/t).
Factors supporting the price cut
- Iron ore spot prices drop on weakening Chinese steel margins: The spot price for iron ore Fe 62% fines reversed by $8.30/t day-on-day (d-o-d) to $215.45/t, CFR China, on 19 May’21, as the continuous fall in Chinese steel prices have put mill margins under pressure. End-users were reluctant to procure either from the seaborne or portside markets due to shrinking margins. However, port stocks for mainstream medium and high-grade fines remained tight, giving some traders confidence to procure seaborne cargoes, On the other hand, Chinese iron ore futures on 19 May’21 plunged by RMB 50/t ($8/t) as output curbs in the top steel-making city of Tangshan weighed on sentiments.
- SHFE steel futures continue to fall: Steel futures on the Shanghai Futures Exchange (SHFE) fell further by RMB 123/t ($19/t) on 20 May’21. SHFE rebar futures Oct’21 contracts closed at RMB 5,186/t ($806/t).
- Chinese domestic billet prices fall $26/t: Domestic billet prices in China recorded a significant fall of RMB 170/t ($26/t) d-o-d on 20 May’21 owing to further decline in rebar futures. The prices of the commonly traded Q235 billet (150mm diameter) were reported at RMB 5,300/t ($824/t) in Tangshan, including 13% VAT.
- Disparity in bids-offers for imported scrap limits trades: Imported scrap trades to China remained dull in the past two-three weeks due to low buying interest and falling futures. Few buyers were bidding for cargoes due to bearish sentiment in the finished steel markets in China where bids have dropped. Indicative bids were heard at $520/t CFR levels for Japanese HRS 101 grade. However, no deals were reported.
Outlook
It is expected that scrap prices may fluctuate in the short term, as per market sources.
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