China: Chinese mills' steel scrap inventories at 8-month high

Mysteel Global: Chinese steelmakers have sped up their replenishment of steel scrap so far this month as the winter deepens, though their immediate demand for scrap materials is weakening, the findings of Mysteel's latest survey showed.

As of December 13, the total inventories of steel scrap piled at the yards of the 300 blast furnace (BF) and electric-arc-furnace (EAF) steel producers under Mysteel's tracking had increased by 251,250 tonnes (t) or 4.6% on week to reach 5.7 million tonnes (mnt), the highest level since early April this year.

In addition to the steelmakers' eagerness for restocking, the strengthening of domestic steel scrap prices also encouraged scrap suppliers to actively ship their products to mills, Mysteel Global noted.

By December 13, China's national composite steel scrap price assessed by Mysteel was at RMB 2,620.59/t ($360/t) including the 13% VAT, up by RMB 6.3/t on week.

Consequently, the total volume of steel scrap arriving at the 300 steel mills averaged 549,490 t/day (d) during December 9-13, higher by 13,531 t/d or 2.5% from the previous week.

Another factor that led to the accumulation of these mills' steel scrap stocks was the further slowdown in their production, Mysteel's other survey showed.

The steadily narrowing margins on steel sales, as well as weak steel demand from end-users, pressed domestic steelmakers to become more cautious in production, Mysteel Global noted.

For example, over December 6-12 average capacity utilization among the 87 independent EAF steel producers under Mysteel's tracking had dropped to 52.89% and made for the fourth consecutive on-week fall.

During December 9-13, the daily consumption of steel scrap among the 300 mills Mysteel monitors had dipped 0.5% on week to 515,560 t/d on average, according to Mysteel's assessment. The existing scrap stocks would be sufficient to last the mills for 9.5 days at their current usage rate, longer by 0.2 day from the previous period.

During the same period last year, the inventories at the same mills were enough for more than 10 days of use, according to Mysteel's data. Steel mills are likely to intensify their steel scrap purchases in the coming weeks, the survey results suggest.

Note:This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.