China: Shagang Steel cuts scrap prices by $14/t on falling steel demand

One of China's largest electric arc furnace (EAF) steelmakers, the Jiangsu Shagang Group, has trimmed its scrap buy prices today. The steelmaker has cut prices sharply by RMB 100/t ($14/t) for all grades against the last revision on 21 October. After the latest revision, HMS (6-10 mm) prices stand at RMB 2,710/t ($379/t) delivered to headquarters, including 13% VAT, effective from 28 October.

Due to the downward trend of finished steel prices and demand in China, mills are forced to cut down scrap procurement prices. Mills continued to operate at a loss, with no intent to buy material.

In terms of inventory, since August 2022, Shagang's scrap stocks have gradually increased by more than 100,000 tonnes (t) compared with mid-August. But daily scrap consumption at present is about 14,000 t (around 4,000 t lower than in October last year), as per sources.

Due to sinking cash flow, steel mills are eyeing on lowering risks on capital utilisation for inventory and input costs to survive in the market.

Chinese market overview-

• Local billet prices dip: Domestic billets prices in China's Tangshan decreased by RMB 60/t ($8/t) w-o-w to RMB 3,560/t ($492/t), inclusive of 13% VAT on 27 October.
  
  
• Drop in rebar futures: China's SHFE rebar futures contract for January delivery closed today at RMB 3,563/t ($493/t), a fall of RMB 31/t ($4/t) w-o-w.
  
  
• Spot iron ore prices drop: Muted demand was seen especially in the secondary market as participants chose to take a wait-and-watch position resulting in a drop of $8.9/t w-o-w. The Fe 62% iron ore index is at $82.50/dry mt CFR North China on 28 October.
  
  
• Imported scrap prices down: Prices of US-origin HMS and shredded material stood at $384/t and $404/t, respectively, declining by $11/t w-o-w.
  
  

China's ferrous scrap imports stood at 54,006 t in September compared to 52,368 t in August, a slight increase of 3% m-o-m, as per SteelMint data. Japan's exports were up 9% at 48,129 t, followed by South Korea and Myanmar at 3,985 t and 476 t, respectively.

Outlook
Jiangsu steel mills have plans to lower their winter stocks and are now shifting to lower arrival of scrap and inventory. Scrapyards might face difficulty in sales in the short term and this situation may last for a while.