China's Shagang Steel scrap purchase price close to 9 - months high on tight availability
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Eastern China's largest ferrous scrap consumer and EAF steelmaker- Shagang group - has announced a price hike for all grades for domestic steel scrap procurement by RMB 20/t ($3), effective from today, 18th Aug '20.
The purchase price of HMS (6-10 mm) thickness has moved up to RMB 2,720/t ($392), inclusive of 13% VAT delivering to headquarters works at Zhangjiagang North of Shanghai in China.
Similarly, for the other grades of HMS (10-20 mm) and HMS (not less than or equal to 20 mm) thickness stands at RMB 2,750/t ($397) and RMB 2,780/t ($401) respectively. The company has increased its domestic prices after one month. Notably, the purchase prices have not been this high since touching RMB 2,730/t on 29th Nov '19. Some of the major reasons behind this are as enumerated below.
Reasons behind price hike -
- Tight scrap availability - Due to rainy weather, scrap processing and transport efficiency was interrupted. Thus, tight availability with mills, pushed prices high. In order to fulfill the procurement's, steel mills have increased the scrap purchase prices
- Higher iron ore prices - Chinese spot iron ore fines prices increased sharply last week to $122.45/t, CFR China, the highest price since July '19. An uptick in iron ore demand was noted as some south China mills have resumed operations following closures in last month's floods. Construction activity in south China has also increased post the end of rainy season. Supplies of mainstream medium-grade ores remain tight.
- High steel futures - SHFE (Shanghai Futures Exchange) rebar futures closed at RMB 3,848/t today compared to RMB 3,723/t on 27th Jul '20. Infrastructure investment announcement for 2nd half of this year has kept sentiments supported in China.
Outlook- Increased domestic scrap prices may remain supported in near short term till scrap tightness eases out, SteelMint learnt.
