China: Shagang Steel hikes scrap purchase price on tight supplies
...
Eastern China's largest ferrous scrap consumer and EAF steelmaker- Shagang Steel - has announced a price hike for all grades for domestic steel scrap procurement by RMB 50/t ($7), effective from today, 4th Sep '20. Prices are trading at over nine-month's high.
The purchase price of HMS (6-10 mm) thickness has moved up to RMB 2,800/t ($409), inclusive of 13% VAT delivering to headquarters works at Zhangjiagang North of Shanghai in China. While other grades including HMS (10-20 mm) thickness stands at RMB 2,830/t ($413) and HMS (not less than or equal to 20 mm) thickness stands at RMB 2,860/t ($418).
Factors behind price hike -
- Tight scrap availability: Due to retreat of flooding and cooled down weather, there is tight supply of scrap. Also interrupted transport efficiency and delivery to mills falls short of expectation which have pushed prices high. In order to fulfill the procurement's demands, steel mills have raised the scrap purchase prices.
- Supportive fiscal policy: With the supportive fiscal policy and peak season continuously affecting the market. Downstream projects speed up their work pace and has pulled up steel demand resulting in steel price uptick.
- Higher iron ore prices: Chinese iron ore fines prices increased to over 6.5 years high yesterday and stood at around $131/t, CFR China. Construction activity in south China has also increased post the end of the rainy season. Supplies of mainstream medium-grade ores remain tight.
- Recovery of finished steel market: Traditionally, September-October are peak months for steel sales in China, as the retreat of the hot temperature during the period generally encourages an increase in construction activities.
However, company plans to shut down 100 t electric furnace and 180 t converter for 12 days maintenance in early Sep '20, which would affect the total steel output of 42,000 t and 78,000 t respectively. Besides, a wire rod production line and a rebar production line is also scheduled to go under maintenance in mid-Sep '20, as per some Chinese media reports. This may result in slightly lower company's scrap requirement.
