China: Shagang Group slashes scrap purchase prices after three months

Eastern China's largest EAF steelmaker- Shagang group has cut scrap purchase prices by RMB 30/t ($4) for all grades, effective from today (25th Jan'21). Limited buying ahead of holidays and decline in global scrap prices have had a dampening effect. Notably, this is company's first price cut breaking a three-month sequence of constant uptrend in prices.

The purchase price for HMS (6-10 mm) now stands at RMB 3,220/t ($497), inclusive of 13% VAT, delivered to headquarters works at Zhangjiagang North of Shanghai in China. While other grades including HMS (10-20 mm) thickness stands at RMB 3,250/t ($501) and HMS (not less than or equal to 20 mm) thickness stands at RMB 3,280/t ($506).

Factors governing price cut -

• In China, most of the steel mills turned down purchase prices as the traditional New year draws nearer.
  
  
• In North China, the price of finished steel is not firm and the demand has weakened
  
  
• Imported scrap offers from Japan to China have come down. Export offers for Japanese scrap have dropped significantly last week due to slow trade activities. SteelMint's price assessment for Japanese H2 scrap export stood at JPY 41,000/t FoB, down by JPY 2,500/t ($24) w-o-w
  
  
• Chinese spot iron ore prices dropped during the week- Chinese spot iron ore prices opened at $173.6/ t this week and slid to $168.6/t towards the weekend. Iron ore prices dropped on sluggish demand and lower steel margins
  
  
• Several steel mills in Hebei province were heard bringing forward blast furnaces maintenance due to COVID-19 pandemic in the region
  
  
• Meanwhile, DCE iron ore futures market in China with price of most-traded May contract closed today at RMB 1046.5, as against RMB 1075.5 a week ago
  
  

China's Shagang Steel kept construction steel prices unchanged for end-Jan'21 - Shagang Steel has kept its construction steel prices unchanged for the rest of the Jan'21. Rebar (16-25mm) price is at RMB 4,700/t, wire rod (16-25mm) price is at RMB 4,860/t and coiled rebar (8-10mm) price is at RMB 4,900/t. Chinese domestic steel demand has slowed down amid winters and the spread of COVID 19.

Outlook - Mills adjust purchase price according to operation realities. It is expected that scrap market in the short term may remain fluctuating as per market sources.