China scrap stocks drop over holiday, prices stable

Total stocks of steel scrap at the 61 steelworks Mysteel regularly monitors across China posted a substantial decrease of 17.5% over January 20-26 due to a standstill in the domestic steel scrap market during the Chinese New Year (CNY) holiday over January 21-27.

As of January 26, total scrap stocks among the surveyed mills including both blast furnace (BF) and electric-arc-furnace (EAF) producers came in at 1.88 million tonnes, a new low since early December 2022.

During the survey period, many scrap recycling and processing companies have left the market for the holiday break, with the daily scrap deliveries to these 61 mills falling sharply by 43.2% from January 19 to average 1,151 tonnes/day. Moreover, slower logistics services during the CNY holiday also dragged down the delivery pace from traders to mills, Mysteel's survey showed.

Despite the plunging delivery, daily steel scrap consumption among the 61 mills remained largely stable at 2,096 t/d over January 20-26, as most BF mills have maintained normal production in anticipation of a quicker revival in steel demand from end-users and a return of industrial activities to normal soon after the CNY holiday break, Mysteel Global noted.

Accordingly, the rather quiet market saw Mysteel's steel scrap price index stay largely stable at Yuan 3,169/tonne ($467.1/t) and including the 13% VAT as of January 29, the second make-up working day for the CNY holiday, or up by a tiny Yuan 1.5/t from January 20.

In the near term, Chinese steel scrap supply may stay tight as traders will still need at least one week after the CNY holiday to resume their normal operations with employees back to work and the national logistics services being fully restored.

On the other hand, the resumption of independent EAF mills, together with BF mills' replenishment needs after having consumed in-house scrap stocks during the past holiday, will see the demand for scrap grow recently.

As a result, the short-term stretch in China's steel scrap supply against the growing demand, thus, may lend strong support to the domestic steel scrap prices, Mysteel anticipated.

Written by Lindsey Liu, liulingxian@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com

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