China's Shagang Steel Cuts Scrap Purchase Price by USD 4
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The steelmaker has revised scrap price after a gap of two months amid limited domestic finished steel demand.
Eastern China's largest ferrous scrap consumer and EAF steelmaker - Shagang Jiangsu Steel group has lowered steel scrap purchase price by RMB 30/MT (USD 4.47) effective from today. After witnessing a price hike by RMB 80/MT on 13th Jan'19, the company has lowered scrap prices amid declining profit margins of EAF steelmakers between rebar and scrap price and concerns of low finished demand in the domestic market.
Now, Shagang Steel is paying RMB 2,620/MT (USD 391) inclusive of 16% VAT for HMS (6-10 mm thickness) delivered to headquarter works situated in Zhangjiagang north of Shanghai in China, down RMB 30/MT against the last report of RMB 2,650/MT on 13th Jan'19.
Following China's largest privately owned steel mill's lead, many other leading scrap consumers' have lowered scrap purchase prices by RMB 20-30/MT in eastern China.
Shagang Steel increased finish long prices for early-March shipment - Shagang is selling HRB400 16-25 mm dia rebar at RMB 4,000/MT (USD 596) over the 1st-10th March period, up RMB 50/MT against the last set of prices for end-Feb'19 shipments. While that for HPB 300 6.5 mm dia wire rod holds at RMB 4,100/MT (USD 611) over the same period. All prices are on an ex-works basis, including 16% VAT.
Latest, Shanghai rebar prices stand almost steady in the range RMB 3,800-3,840/MT ex-warehouse as demand is sluggish on futures losses. Domestic rebar prices showed mixed sentiments while wire rod export prices marginally increased against last week. Offers from steel mills reported for wire rod at USD 535-540/MT, FoB, up USD 5-10/MT W-o-W.
Profit margins remain dull - According to sources, presently the price difference between rebar and scrap is narrowing down, and the profit of steel mills is declining in the country. After the Spring festival, rebar prices have no demand support and have been in a downturn, while the scrap market, affected by resource constraints, is sought after by increased premiums by mills. Due to the impact of cost constraints, the production of EAF steel is not good, and the operating rate and capacity utilization rate are at a low level.
Resumption of operation by EAF steelmakers likely to put pressure on finish steel prices - As the downstream construction sites resume work in March, the market and speculative demand will recover, propping up the rebar price to some extent. Many of the EAF makers haven't started operation yet and may resume operation by this week. By then, EAF steel mill operating rate and capacity utilization will continue to increase, and scrap demand will be unleashed. But under the pressure of profits, EAF steel mills are unlikely to increase scrap prices though it may regain momentum along the recovery of rebar price later on.
