China: Shagang cuts scrap procurement prices by $11/t on steel output curbs

China's largest EAF steelmaker, Jiangsu Shagang Group, has announced a cut in its scrap purchase prices today, after a hike seen at the start of the month. The steel producer has lowered its scrap buying prices by RMB 70/tonne (t) ($11/t) for all grades, effective 17 Sept'21, sources confirmed.

After the latest round of revisions, prices of HMS (6-10 mm) stand at RMB 3,710/t ($575/t), inclusive of 13% VAT, delivered to headquarters.

Factors behind drop in scrap purchase prices

• Steel production curbs: According to data from the China Iron and Steel Association (CISA), the average daily crude steel output of key steel companies in early-Sept'21 stood at 2.0449 million tonnes (mn t), a decrease of 7,800 t from the previous month, or 0.38%. Early September production witnessed a y-o-y decrease of 4.29%. China is ramping up steel output controls in a bid to curb carbon emissions.
  
  
• Steel maintenance plans at Shagang: Due to steel production restrictions, scrap utilisation of mills has decreased. In the meantime, Shagang will put two steel bar production lines to maintenance alternately from 16-30 Sept'21, affecting approximately rebar output of 36,400 t.
  
  
• Iron ore spot prices plunge: The spot price of iron ore Fe 62% fines fell by $6.9/t d-o-d on 16 Sept'21 to $106.5/t CFR, China as buyers remained on the sidelines amid oversupply concerns. Market sources are not optimistic of a demand pick-up in the near term. Steel production curbs in China along with weak August steel output data point to lacklustre Chinese buying interest.
  
  
• SHFE re-bar futures fall: As per data gleaned by SteelMint, re-bar futures contract for Jan'22 contract tumbled today at RMB 5,478/t ($849/t), witnessing a fall of RMB 63/t ($10/t), d-o-d. Demand is expected to remain weak in the market amidst tighter steel production limitations.