China: Scrap prices fall to 5-month low as Shagang cuts purchase prices by $13/t

China's leading EAF steelmaker, Jiangsu Shagang Group, cut its scrap purchase prices today, 28 Oct'21. The steel producer reduced its scrap procurement prices by RMB 80/tonne (t) ($13/t) for all grades, with immediate effect, sources confirmed.

With this cut, overall, scrap prices have hit a 5-month low. The same levels were last seen in end-May'21.

Current prices of HMS (6-10 mm) stand at RMB 3,650/t ($571/t), including 13% VAT, delivered to headquarters. This is the second price cut announced by the company so far this week.

Many local steel mills have cut their output on the local authority's order which led to a decline in their scrap consumption, market sources informed.

Factors supporting the decline

• Drop in billet prices: Steel billet prices in China's Tangshan fell to RMB 4,900/t ($766/t) on 27 Oct'21, including 13% VAT, down by RMB 60/t ($9/t) d-o-d. Prices declined mainly due to limited demand and decreasing prices of rebar futures.
  
  
• Fall in rebar futures: According to data maintained with SteelMint, China's SHFE rebar futures contract for Jan'22 delivery settled at RMB 4,773/t ($746/t) on 27 Oct'21, witnessing a sharp decline of RMB 636/t ($99/t), w-o-w.
  
  
• Fall in crude steel output on production controls: The world's largest steel producing country, China, churned out 73.8 million tonnes (mn t) of crude steel in Sept'21, registering a 21.2% decline over CPLY. There were increased production controls in major steelmaking hubs like Hebei and Jiangsu, along with Tangshan.
  
  

Outlook:
With continuous decline, it is further expected that scrap prices may fluctuate in the upcoming days.