China ferrous scrap prices may strengthen in March

Chinese prices of ferrous scrap are expected to move upward this month, as scrap demand among steelmakers is likely to grow firmly, while scrap availability in the domestic market may remain tight, Mysteel's latest survey suggests.

The country's scrap prices showed little fluctuation last month, as the domestic scrap market stayed largely quiet around the national holiday for the Chinese New Year (CNY) celebration in mid-February, though the bearish sentiment post-holiday caused the prices to weaken at the end of the month, according to the survey.

On February 29, China's national steel scrap price index under Mysteel's assessment stood at Yuan 3,031/tonne ($427.7/t), lower by Yuan 12.2/t from January 31.

Entering March, China's steel scrap demand may brace for a marked growth, with electric-arc-furnace (EAF) steelmakers gradually resuming operations, and downstream steel demand is also expected to recover in the traditional peak season for steel consumption in China, Mysteel Global notes.

Most EAF steelmakers in China had stopped production to celebrate the CNY since early February, and some of them began to switch on their furnaces from February 24, according to Mysteel's other survey. As of February 29, the average capacity utilization rate among the 87 independent EAF mills under Mysteel's regular tracking stood at 29.11%, which was still much lower than the normal level.

This month will see production among domestic EAF mills continue to rise, leading their steel scrap consumption to grow in tandem, the survey suggests.

Meanwhile, domestic steel demand among end-users may grow more rapidly in late March, since spring is the traditional peak season for steel consumption in China, which is expected to give a boost to finished steel prices and thus provide firmer support for the prices of steelmaking raw materials including steel scrap, market sources believe.

On the other hand, market supply of steel scrap may remain tight this month even though domestic scrap collecting and processing firms have cranked up their operations after the CNY holiday, Mystee's survey showed.

As of March 1, the total steel scrap inventories held by the 584 domestic scrapyards qualified by the country's Ministry of Industry and information Technology stood at 963,280 tonnes, losing 58,170 tonnes or 5.7% on month, according to Mysteel's tracking.

Given the persistently gloomy property market in China, the progress of domestic construction projects is quite slow, so the increase in the scrap supply from this field will be limited this month, Mysteel Global noted.

As a result, the mismatch between steel scrap supply and demand in China may still exist in March, which will likely drive up the domestic scrap prices overall, market sources believe.

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