China: Shagang Steel scrap purchase prices hit 7-month low

China's leading electric arc furnace (EAF) steelmaker, Jiangsu Shagang Group, cut its scrap purchase prices for the seventh time since end-Oct'21. The steel producer reduced its scrap procurement prices by RMB 50/tonne (t) ($8/t) for all grades with immediate effect, sources informed.

Current prices of HMS (6-10 mm) stand at RMB 3,420/t ($535/t), including 13% VAT, delivered to headquarters. Notably, prices are equivalent to those seen in early-Apr'21, falling to a seven-month low.

Scrap demand of Chinese mills has been negatively impacted by steel production curbs and weak demand brought on by the ongoing winter season. Some steel mills are facing production and electricity consumption restrictions which have kept scrap demand low, SteelMint notes.

Factors behind the price cut

• Chinese billet prices drop further: Steel billet prices in China's key production hub of Tangshan stood at RMB 4,600/t ($719/t), inclusive of 13% VAT, on 9 Nov'21, down by RMB 250/t ($39/t) as compared to the closing price of last week.
  
  
• China's finished steel prices under pressure: China's steel prices fell last week with some categories of finished products falling by more than RMB 300/t ($47/t). Since September, the daily output of steel remained low. In late-October, key steel companies produced 1.735 million tonnes (mn t) of crude steel per day, a decrease of 139,000 t from the previous month and by 19.5% y-o-y.
  
  
• Chinese rebar futures downtrend: According to SteelMint data, the rebar futures contract for Jan'22 delivery on the Shanghai Futures Exchange (SHFE) closed on 9 Nov'21 at RMB 4,257/t ($666/t), a d-o-d drop of RMB 55/t ($9/t), after increasing by RMB 65/t ($10/t) the previous day.
  
  

Outlook
In recent times, finished steel prices declined sharply owing to lesser demand, it is anticipated that scrap prices will continue to decline in the short term.