China: Shagang Steel hikes scrap purchase prices sharply on global cues and supportive steel prices

• Prices increased by RMB 100/t ($15.5) for all grades
  
  
• Shagang's domestic scrap purchase prices are highest since Oct'17
  
  

Eastern China's largest EAF steelmaker - Shagang Steel has raised its scrap purchase price by RMB 100/t ($15.5) for all grades, effective from today. The purchase price for HMS (6-10 mm) now stands at RMB 3,290/t ($508) inclusive of 13% VAT, delivered to headquarters works at Zhangjiagang North of Shanghai in China.

Prices for other grades such as HMS (10-20 mm) thickness stands at RMB 3,320/t ($513) and HMS (not less than or equal to 20 mm) thickness stands at RMB 3,350/t ($517). Hike in global scrap prices along with improved semi-finished steel prices supported the hike in scrap prices.

Notably, this is the company's first price revision in Feb'21 and prices have hit a four-year high since Oct'17, as per data maintained with SteelMint.

Reasons behind the scrap price hike -

• Hike in global scrap prices - Global scrap prices have shot up on supply tightness and hike in freight rates. Bulk Japanese scrap offers for Vietnam have risen by $20-25/t compared to the offers assessed towards the beginning of this week. Currently, the H2 offers are at $450-460/t CFR Vietnam.
  
  
• Tangshan billet price hits nine-year high on production cuts - Tangshan Q235 150mm square billet price in North China soared to its over nine-year high. Today, the billet prices in the Tangshan market Northeast China stood at 4,280/t ($661) in Tangshan, including 13 % VAT. China's rebar price rose to its two-year high since it resumed work after Chinese New Year (CNY).
  
  
• Chinese Iron ore futures rose after CNY holidays - Chinese iron ore and steel futures market resumed after the week-long CNY holiday. Yesterday, SHFE rebar and HRC futures jumped by RMB 92 and RMB 68. Chinese steel futures rose on expectations of global demand rebounding from pandemic lows while supply worries sparked by output curbs in top steelmaking city Tangshan also fuelled gains.
  
  
• Supply tightness - In North China and Northeast China, scrap prices continue to increase. However, before the Lantern Festival, the scrap supply is still tight and the scrap arrival of steel mills is not seen adequate.
  
  

Outlook - The EAF based steel enterprises are making profits and hence they are active in steel production. With the prices of semi-finished steel and finished steel continue to increase, it is expected that scrap price may continue to increase in the short-term.