China Steel Scrap Prices Soften on Weak Demand-Supply

China's domestic steel scrap market shows no signs of recovering in the near term, as both scrap demand and supply remain weak. As of March 10, Mysteel's price index for common grade scrap decreased by another Yuan 14.6/MT ($2.1/MT) on week to refresh its 11-month low of Yuan 2,491.1/MT including the 13% VAT, Mysteel's data shows.

Beginning this week some independent electric-arc-furnace (EAF) producers in Southwest and East China have gradually returned to work. As a result, average capacity utilization among the 53 independent EAF steelmakers across China which Mysteel monitors weekly rebounded by 3.91 percentage points on week to a two-month high of 7.61% as of March 5, albeit still at its record low level, according to Mysteel's latest survey.

"The slow recovery in EAF capacity was largely because some EAF producers only resumed a small account of capacity or restarted only their rolling lines, which contributes little to improving scrap demand," a Shanghai-based market analyst said.

The weak scrap demand situation was similar among blast furnace (BF) mills. The integrated steel mills are still reducing the ratio of scrap feeds in furnaces and converters amid the tumble in both steel prices and sales. Consequently, daily consumption of scrap at the 61 steel works under Mysteel's regular survey decreased by another 1.06% on week or by a huge 35.26% from the lowest level in 2019 to just 1,559.2 MT/day as of March 5.

On the other hand, because of the slow resumption of business among scrap recycling and processing companies, scrap availability is also down on normal levels, leaving scrap traders struggling to obtain enough scrap products during this period. At present, most of the tradable scrap consists of stocks which traders collected before the Chinese New Year holiday in late January, Mysteel Global noted.

Domestic steel scrap prices are now squeezed by the pressure of supply tightness and the weak scrap demand from steel mills amid their high finished steel inventories. Industry watchers predict scrap prices are likely to continue softening further in coming weeks.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.