China: Shagang Steel raises domestic scrap purchase price on tight supplies and rising imported offers

• Prices up by RMB 50/t ($8)
  
  
• Japanese scrap suppliers raised scrap offers to China by $20/t last week
  
  
• Chinese ferrous scrap imports rose significantly after easing of restrictions
  
  

China's largest EAF steelmaker- Shagang Steel has announced scrap purchase price hike yesterday by RMB 50/t ($8) for all grades. Currently, for HMS (6-10 mm) the company is paying RMB 3,540/t ($545), inclusive of 13% VAT, delivered to headquarters works at Zhangjiagang North of Shanghai.

Prices for other grades such as HMS (10-20 mm) thickness stands at RMB 3,570/t ($550) and HMS (not less than or equal to 20 mm) thickness are at RMB 3,600/t ($555). This is company's third price hike made in Apr'21.

Factors behind the hike in scrap purchase price -

• Japanese scrap offers to China head northward - Japanese scrap offers have climbed further by $20/t before the Golden week holidays and offers have increased to $520/t CFR levels. Trades of around 3,000 t have been concluded recently at $505/t CFR basis for Japanese HRS 101-grade scrap. However, Chinese mills are yet to raise their bids for Japanese scrap to the tune of quoted offers.
  
  
• China's ferrous scrap import climbs in Q1 CY'21 - China imported 38,602 t of ferrous scrap in Q1 CY'21 registering an exponential rise y-o-y basis. In fact, the Q1'21 quantity is even higher than the total imports of CY'20 of ferrous scrap which was 27,133 t. Similarly, import volume was recorded at 31,496 t in Mar'21, rising sharply m-o-m against 3,046 t in Feb'21. The majority of the scrap imports in Q1 CY'21, was from Japan with a share of 62% of total imports. China's scrap imports have been increasing after it eased restrictions earlier this year.
  
  
• Optimistic steel sentiments - The scrap demand is good as the EAF based steel mills are active in production and the prices of semi-finished steel and finished steel and billets are on an uptick again boosting the confidence of scrap market.
  
  
• Surge in Chinese billet prices - Chinese domestic billet prices remained broadly stable despite fluctuating rebar futures and witnessed having settled with a drop of RMB 10 ($1.5) at RMB 4,950/t ($762/t), ex Tangshan, including 13% VAT.
  
  

• Spot iron ore price soar to 10-years high - Chinese spot iron ore prices opened at $181.2/t, CFR China and increased to a ten-year high to reach $187.75/t, CFR China towards mid-last week. The iron ore prices rallied as better market expectations for high-grade fines boosted the sentiment. Prices were supported by more end users procuring at portside ahead of the Labour Day holidays (May 1-5).
  
  
• Shagang Steel rolled over long steel price for end-Apr. sales - Shagang Steel has kept its construction steel prices unchanged for end-Apr. sales, effective from 21st till 31st Apr'21. The current price of Rebar (16-25mm) stands at RMB 5,250/t ($809) on ex-mill basis, taxes inclusive.
  
  

Outlook - It is expected that the scrap price may continue to be strong this week and hence there are chances of a further increase.