China mills expedite winter stocking of scrap as supply tightens

The indifference displayed previously by Chinese steelmakers towards stocking steel scrap for winter is gradually being replaced by eagerness, the results of Mysteel's latest survey show, as the tightening availability of scrap is prompting mills to speed up scrap procurement to ensure they have sufficient feed materials for production throughout winter.

"Usually, winter is a slack season for scrap consumption in China but this year, the actual market performance remains warm," a market analyst based in Shanghai noted.

"During the past two months the domestic mills have generally lifted their scrap use by some 30% after recognizing its strong cost effectiveness," she added, predicting that the mills' enthusiasm for production is likely to continue in January because they are still enjoying healthy margins.

Meanwhile, scrap collecting and processing on site, along with the transportation of scrap materials, are being hindered by the winter cold, as reported.

Many steelmakers from East, North and Central China are facing difficulties in sourcing steel scrap, Mysteel Global learned. Most mills plan to accumulate sufficient stocks for 10-30 days of use, yet building inventory is not going smoothly due to the scrap shortages, the survey findings show.

For example, in East China's Jiangsu province - the country's core steel scrap consumption center - steel scrap inventories in scrapyards and ports remain at low levels, and orders have already been accepted for part of the stocks on hand, according to the Shanghai analyst.

"That is the reason why steel mills have collectively raised their scrap buying prices recently," the analyst said. "Some mills realised that the volume of scrap arriving at their yards was far lower than their daily consumption, so they hurried to lift prices hoping to attract more deliveries from dealers," she explained.

In the past two weeks Shagang Group, China's leading EAF steelmaker headquartered in Jiangsu's Zhangjiagang, has raised its scrap buying prices twice by a total of Yuan 100/tonne ($14.2/t), as reported.

"The steelmakers' growing winter stocking demand is likely to continue driving up domestic steel scrap prices," the analyst predicted. "However, steel mills are incurring high production costs now, so the room for further increases in scrap prices will be limited," she warned.

As of December 27, Mysteel's national steel scrap price index stood at Yuan 3,032.8/t including the 13% VAT, refreshing the highest level since early August this year.

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