China's Steel Scrap Prices to Keep Weakening

Chinese steel scrap prices are likely to continue softening in the near term, as scrap consumption among domestic steelmakers may continue to decline amid the slow recovery in finished steel demand, a market source said Thursday. Fewer deliveries of finished steel amid the Novel Coronavirus Pneumonia (NCP) outbreak have produced surges in both finished steel among steelmakers and in scrap inventories held by collectors and traders.

As of February 19, Mysteel's steel scrap price index was assessed at Yuan 2,546.5/tonne ($364/t) including the 13% VAT, making for a total fall of Yuan 38.8/t since February 3, the first working day after Chinese New Year (CNY) holiday.

"The continuous decreases in scrap prices are not likely to end in the short term," a Shanghai-based market analyst warned. "As most integrated steel mills maintained normal production during CNY break while downstream demand has stayed week, finished steel inventories among producers have risen and are having a significant impact on domestic prices. This is affecting raw materials prices as well," he told Mysteel Global.

As of February 12, inventories of the five major finished steel items comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate at the 184 Chinese steel mills Mysteel monitors weekly increased to a near five-year new high of 11.5 million tonnes.

On the other hand, the accumulation of steel scrap stocks at scrap collecting and recycling enterprises will weaken scrap prices further. According to Mysteel's survey among 276 qualified steel scrap suppliers nationwide approved by China's Ministry of Industry and Information Technology, their present scrap materials at hand have increased to 2.33 million tonnes.

"We have not resumed normal work because of the shortage of manpower and basic medical supplies, plus the ongoing disruptions to transportation," an official from one qualified scrap company in East China's Jiangsu province said, predicting that the present abundance of scrap materials will likely prompt a new round of scrap price cuts.

As of February 18, less than 30% of the 276 sampled qualified scrap enterprises had resumed operation, according to Mysteel's survey.

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