China's Aug scrap use in steel dips to 26.2% - Mysteel

Steel scrap utilization in the crude steel produced by the 211 Chinese steel mills sampled in Mysteel's regular survey decreased for the third successive month in August, dipping by another 0.54 percentage point from July to 26.2% on average. The survey samples integrated and electric-arc-furnace (EAF) producers, as well as those mills using both blast furnace (BF) and EAF technologies.

As of end-August, these 211 surveyed mills held 5.99 million tonnes of steel scrap in inventory, or higher by 105,100 tonnes on month, the survey results showed. Their total steel scrap consumption during August decreased by 883,800 tonnes on a month to 16.7 million tonnes.

Scrap use in domestic steel output declined mainly because of the decrease in usage among BF mills last month, the results indicated.

For example, steel scrap utilization among the 130 blast furnace mills Mysteel samples decreased to this year's low of 17.91% last month - equivalent to nearly 8.3 million tonnes of scrap in volume - which was lower by 0.84 percentage point, or 617,000 tonnes compared with July.

"In fact, to some BF mills, consuming steel scrap is only marginally more cost-effective than producing molten iron, so when the price spread between steel scrap and rebar narrowed, abandoning steel scrap makes sense to them," a Shanghai-based market source told Mysteel Global.

As of August 31, the price spread between steel scrap and rebar averaged Yuan 1,613.36/tonne ($249.7/t), lower by Yuan 120/t on month, according to Mysteel's assessment.

Moreover, in July, some BF steel mills across the country trimmed output in response to Beijing's orders to reduce crude steel output during the rest of this year, which also lessened their need to consume steel scrap, according to her.

Besides the BF-only mills, the 24 mills operating both the BFs and EAFs used 23.96% of scrap in their steel melts in August, also decreasing by 1.48 percentage points on the month.

Nevertheless, the trend for the remaining 57 EAF mills was different, with their scrap usage in crude steel output assessed at 94.43% or up 1.02 percentage points on month, Mysteel's survey showed.

Written by Lindsey Liu, liulingxian@mysteel.com

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