China: Shagang announces 2nd scrap procurement price cut for Aug'21

China's largest electric-arc furnace (EAF) steelmaker, the Jiangsu Shagang Group, has announced the second drop in its scrap purchase prices for Aug'21, sources informed SteelMint. The steel producer has cut scrap purchase prices by up to RMB 50/t ($8/t) across all grades. This is the company's second price cut announced in August. Last week too the company had slashed offers by similar amounts.

After today's revision, present prices for HMS (6-10 mm) stand at RMB 3,750/t ($579/t), inclusive of 13% VAT, delivered to headquarters. The recent pandemic control measures had an impact on transport, resulting in lessened deliveries to some mills. The Chinese steel scrap market became slow. The prices got pulled down because of the drop in finished steel prices.

Reasons for decline in scrap acquisition price

• Fall in Chinese steel prices: Steel billet prices in China declined sharply by RMB 90/t ($14)/t to RMB 5,080/t ($783/t), inclusive of 13% VAT on 9 Aug'21. The sharp drop in prices was due to the plunge in rebar futures amid concerns of production cuts weakening steel demand.
  
  

• Chinese iron ore spot prices drop: The spot price of iron ore Fe 62% fines fell sharply by $13.10/t to $170.05/t CFR China on 5 Aug'21, as demand for the steelmaking raw material reduced. The market turned bearish over demand concerns against the backdrop of strict steel production curbs in China.
  
  
• Iron ore and steel futures slump on weak demand: The key reason for the fluctuations is a crucial Chinese government meeting held on 30 Jul'21, whereby it decided to take corrective action on emission cuts which led to speculation of possible softening of steel output cut measures. Such a decision could change the entire dynamics of the strict production cuts planned out over the second half (H2) of the calendar. SHFE rebar futures Oct contract closed at RMB 5,330/t on 9 Aug against RMB 5,379/t seen towards the closing of last week.
  
  
• Drop in global scrap prices: Japanese scrap export offers have declined further owing to limited inquiries on discrepancies in bids and offers. SteelMint's price assessment for Japanese H2 scrap exports stood at JPY 46,000/tonne (t) FoB on 6 Aug, down by JPY 1,000-1,500/t compared to last week.
  
  

Outlook
With the finished steel market looking weak, it is expected that the scrap market too would keep weak in the short run.