About 93% of China's Qualified Steel Scrap Yards Operating

Around 93% of the 292 qualified steel scrapyards across China had resumed operations by April 23, up substantially from the around 30% of the total two months ago, mainly as both the domestic demand and prices have recovered over the period, according to the latest Mysteel's survey.

"Resumption among steel scrap collecting and processing companies has picked up the pace to match the steady recovery in demand", a Shanghai-based market source commented.

The 292 steel scrapyards have passed the qualification checks by China's Ministry of Industry and Information Technology, saw their processed steel scrap stocks decline by about 19.5% on month to 622,300 MT, and the tonnage yet to be processed also declined by about 24.5% on month to 949,700 MT, both as of April 23, according to Mysteel's survey.

Lower stocks had been largely due to pessimism among the scrap collectors and recyclers in China when China's scrap prices had been under pressure during late March to mid April, which had propelled them to keep low inventories on hand for fear for further price declines.

The situation, however, has looked up around end of March and early April, and scrap consumption among the 61 Chinese steel mills including both blast furnace and electric-arc-furnace producers increased for the fourth consecutive week, up another 4.8% on week to about 2,713 MT/day over April 17-23, Mysteel's other survey showed.

"Most of Chinese steel mills have been out of lossmaking recently, and they have been ramping up steel output, and their scrap consumption, thus, has grown," the Shanghai source said, adding that steel producers' demand for steelmaking raw materials including scrap may incline further because of the need for replenishment ahead of the Labour Day holiday in China over May 1-5.

The imbalance in demand and supply for the time being has lent support to the Chinese scrap price, and as of April 28, Mysteel's national steel scrap pricing index edged up by RMB 54.5/MT (USD 7.8/MT) from the start of the month to RMB 2,298.3/MT including the 13% VAT.

China's domestic scrap price may very likely to remain steady or inch up in the near term, according to the Shanghai source, as "mills will not mind paying more just to get hold of enough scrap supplies for normal production during the holiday", she explained.

Besides, scrap supply is unlikely to increase immediately, as "it will take a while for the scrapyards that have recently resumed operations to start supplying scrap to the market", she added.

The first quarter is usually a low season for scrap collection because of the cold winter in the most part of North China as well as the Chinese New Year celebration around January-February. For 2020, the collection had also been affected by the lockdown in many parts of China to mitigate the spread of the COVID-19, Mysteel Global understands.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.