The steady increase in steel scrap prices has undermined the profits of China’s electric-arc-furnace (EAF) steelmakers, with the mini-mills’ margins on rebar falling to around Yuan 50/tonne ($7.1/t) on average over the past week, market sources commented Thursday.
“Since about the start of this month, the profits we can enjoy on producing rebar have fallen from Yuan 100/t to around Yuan 50/t, which is getting closer to break-even for most makers,” an official from an independent EAF steelmaker from South China’s Fujian province explained. To keep their furnace operating normally, his mill had no choice but to pay more for scrap feeds, he lamented to Mysteel Global.
As of June 10, Mysteel’s steel scrap price index had reached a three-month high of Yuan 2,492.6/t on delivery to mills and including the 13% VAT, higher by Yuan 46.1/t on week, Mysteel’s data shows.
Also on Wednesday, China’s national price for HRB 400 20mm dia rebar slid for a second day, losing another Yuan 9/t on day to settle at Yuan 3,837/t and including the VAT. The softer rebar price reflected declines in spot trading and finished steel demand generally as the usual Wet Season rains disrupt business.
As a result, the price spread between rebar and steel scrap had narrowed by Yuan 63.06/t on week to Yuan 1,349.41/t as of June 10. The continuous climb in steel scrap was mainly attributed to the supply tightness amid the seasonal decline in availability, as reported.
“Now, we’re being very cautious about the market as it is really hard to secure more scrap materials from local scrap collectors, even at a higher price,” a steel scrap trader from East China’s Jiangsu province told Mysteel Global.
An official with a large-sized scrapyard in East China’s Zhejiang province was adamant about defending sales prices. “We are not willing to sell if the prices are not appropriate, as we only have 2,000-3,000 tonnes of steel scrap in stock, much lower than at the same period last year,” he explained.
On the other hand, despite the thinner profit margins domestic EAF producers are suffering, most mills have kept production firm nonetheless, which will further strengthen scrap demand, Mysteel Global noted.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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