China's Shagang Steel hikes scrap purchase price on strong steel demand

Eastern China's largest EAF steelmaker- Shagang group hiked scrap purchase price for all grades yesterday by RMB 100/t ($15). The purchase price of HMS (6-10 mm) thickness has increased to RMB 2,890/t ($436), inclusive of 13% VAT delivering to headquarters works at Zhangjiagang North of Shanghai in China, effective from 5th Nov'20. Winter restocking has pushed up scrap prices.

While price of other grades including HMS (10-20 mm) thickness stands at RMB 2,920/t ($441) and HMS (not less than or equal to 20 mm) thickness stands at RMB 2,950/t ($445).

Considering exchange rate - 1$=6.62 RMB

• High domestic scrap prices boosted finished steel demand -This year winter is forecast to be relatively cold in central, northern and eastern regions of the country, due to which construction activities have been steeped up since Golden week holidays in early October, supporting steel prices and production levels.
  
  
• Supply tightness - Steel mills have adjusted scrap consumption slightly according to the production restriction policy, and the impact is limited. The local scrap resource supply is still tight, which pushed prices high.
  
  
• Hike in domestic billet prices -The billet prices in the Tangshan market (northeast China) witnessed a rise of RMB 70 ($11) w-o-w. The price of commonly traded Q235 billet 150 mm diameter was reported at RMB 3,510/t ($530) in Tangshan, inclusive of 13 % VAT.
  
  
• Rebar futures close higher -SHFE rebar futures Jan'21 contract increased by RMB 32 today against yesterday and closed at RMB 3,782/t
  
  

Shagang to put blast furnace on 14-day maintenance - China's Shagang Steel is planning to put its blast furnace on maintenance and repair for a period of two weeks, ending 30th Nov'20. This would affect a total crude steel output of 4,600 t on a daily basis and 64,500 t in total. Besides, it has also scheduled maintenance of its wire rod lines for a period of 15 days, affecting a daily output of 2,500 t and a total of 37,500 t.

Outlook - It is expected that the scrap price may continue to be strong in the short-term, as per market sources.