China qualified yards' steel scrap stocks mount steadily

Inventories of steel scrap held by Chinese scrapyards have been rising continuously since mid-November though at a relatively slow pace, according to Mysteel's tracking. Market sources attributed the growth of stocks to the scrap processing companies' bullish sentiment, as well as the disruptions to road transport caused by deteriorating winter weather over recent weeks.

As of December 15, the 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 totalled 1.03 million tonnes, higher by 22,775 tonnes or 2.3% on month, Mysteel's survey showed.

"The strengthening of domestic steel scrap prices has mitigated the pessimism that market participants had previously displayed," a market analyst based in Shanghai explained. "Now more scrap suppliers are choosing to hold back on sales, hoping to see a further rise in scrap prices," she said.

As of December 19, for example, Mysteel's national steel scrap price index had touched a near three-month high of Yuan 2,995.1/tonne ($41.6/t), gaining 2% from the end of November.

Domestic steel scrap prices are climbing on the back of solid support from steelmakers' stable demand, Mysteel Global noted. Electric-arc-furnace (EAF) mills are producing enthusiastically as they are earning healthy profits on steel sales, while blast furnace (BF) mills are also inclined to use more scrap in steelmaking because it is far more cost effective than hot metal, as reported.

During December 11-15, daily average consumption of steel scrap among the 300 EAF and BF steelmakers under Mysteel's tracking hovered around a seven-month high of 567,895 tonnes/day, while scrap arrivals at their yards eased 3% on week to 562,528 t/d on average.

On the other hand, the recent heavy snowfalls in North China also slowed scrap deliveries to steel mills there as road traffic was disrupted in some regions, Mysteel Global learned.

As a result, Chinese scrapyards saw their steel scrap inventories increase steadily. However, their stock accumulation may slow in coming weeks, the Shanghai analyst predicted.

As the steelmakers' scrap demand rises - both for their immediate production use and for winter stocking - it is likely that the scrap suppliers will lift the pace of their deliveries, depleting their stocks, she explained.

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