China qualified yards keep reducing steel scrap stocks

After the temporary pickup seen earlier this month, ferrous scrap inventories held by Chinese scrapyards have declined again as the slump in domestic steel scrap prices made the yards hurry to reduce their stocks to avoid financial risks, Mysteel's latest survey found.

As of March 20, the total inventories of processed and unprocessed steel scrap held by the 584 Chinese steel scrapyards qualified by the country's Ministry of Industry and Information Technology had fallen by 2.2% on month to reach 930,996 tonnes, refreshing the lowest level since October 2022, according to Mysteel's tracking.

Earlier this month, the domestic scrapyards gradually resumed normal operations after their Chinese New Year holiday breaks, causing their stocks to edge up as scrap collecting and processing recovered momentum, Mysteel Global noted.

However, the yards' enthusiasm for work soon cooled after their hopes for a strong spring revival in China's steel market proved false, as reported. The slack steel demand was reflected in the steep fall in prices across all the country's ferrous commodity markets in mid-March.

By March 20, China's national steel scrap price was assessed by Mysteel at a 16-month low of Yuan 2,789.1/tonne ($392.6/t) including the 13% VAT, lower by 8.3% on month.

The drastic price drops prompted scrap dealers to scramble to sell their stocks for fear that the value would diminish further, as reported, with the rush only subsiding once the dealers began suffering negative margins.

Mysteel's other survey showed that by March 12, the total volume of steel scrap arriving daily at the 300 sampled blast furnace and electric-arc-furnace steelmakers had increased to a six-week high of 534,013 tonnes - before massively retreating to just 464,386 tonnes as of March 20.

The losses on sales not only chilled scrap delivery volumes, but also forced some yards to scale back or even suspend their collection of steel scrap amid the market gloom, a source observed.

As a result, scrap inventories among scrapyards remained on a downward slide overall and are likely to hover at low levels for the time being unless scrap prices show a notable recovery, market sources believed.

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