China: Shagang Steel raises scrap purchase prices for third time in March

China's leading electric arc furnace (EAF) steelmaker, the Jiangsu Shagang Group, raised its scrap purchase prices by RMB 50/t (tonne) ($8/t) today, ie, 29 Mar'22. Notably, this is the third hike in this month to improve scrap deliveries to steel mills.

The company's current procurement prices for domestic HMS (6-10 mm) scrap surpassed the previous ten-month record and stood at RMB 3,920/t ($615/t), including 13% VAT, delivered to headquarters.

Factors supporting price hike

• Securing scrap deliveries on falling stocks: Apart from disruption in logistics, a few scrap recycling and processing units have also been halted due to the rising Covid-19 cases in the country, and scrap traders have declined scrap deliveries to the mills. Thus, many steel mills had to lift bids in order to secure deliveries. Scrap stocks at Chinese mills have fallen for the fourth week.
  
  
• SHFE rebar futures show uptrend: According to data maintained with SteelMint, China's SHFE rebar futures contract for May'22 delivery closed at RMB 5,058/t ($794/t) on 28 March, 2022, witnessing an increase of RMB 45/t ($7/t), d-o-d.
  
  
• China's billet price increases: Steel billet prices in China's Tangshan rose by RMB 30/t ($5/t) on 28 Mar'22. Prices stood at RMB 4,830/t ($758/t), including 13% VAT. Prices rose and followed the rebar futures trend.
  
  
• Supportive finished steel prices: China's Shagang Steel rolled over long steel product prices for late-March 2022 sales. Currently, rebar (16-25 mm) prices are at RMB 5,200/t ($816/t), wire rods (6-10 mm) at RMB 5,310/t ($833/t), and coiled rebar (8-10 mm) at RMB 5,400/t ($847/t). However, in mid-March, prices rose by $32/t amid bullish global sentiments and the rise in raw material costs.
  
  

Outlook:
At present, the market scenario is unpredictable as prices of raw materials are too high, leading to price hikes in finished steel products. Moreover, due to Covid related logistical problems, it is expected that prices will fluctuate in the near term.