Chinese Ferrous Scrap Exports Likely To Fall in Oct'17

Strong demand for steel scrap in China's domestic market may result in reduced export volumes in the near term.

Ferrous scrap exports from China has been growing consecutively from last few months but in Oct'17 this trend may change owing to increasing domestic scrap purchases by Chinese steel mills. Recently leading steel producers in China have lifted domestic scrap purchase prices and started buying scrap aggressively in order to restock ahead of approaching winter season.

This may, in turn, reduce steel scrap export volumes from China which have shown a massive increase in last few months. This is also evident from the recent decline in minimum price fixed by local governments in most of the provinces in China. This minimum price is referred to calculate an export tax.

Local government can revise minimum price on scrap based on the volumes that are being exported. If volumes are higher, government increases minimum price and if volumes are low, the government reduces the minimum price. These prices are same on all kind of ferrous scrap (Bundle, Shredded, Busheling).

Tianjin Province has reduced minimum export price limits on scrap further in Oct'17 -

As per recent conversation with market participants in China, SteelMint learned that Tianjin government has lowered minimum export price on ferrous scrap exports recently. These minimum export price levels are governed by the respective governments in local provinces and not by the central government.

Tianjin province in China has recently declined the minimum export prices for ferrous scrap from USD 180/MT to USD 120/MT in order to increase exports from the same province. Earlier to this, it was seen at the level of USD 210/MT. Notably, Chinese government has 40% export tax intact on Chinese steel scrap exports.

China's Shagang Steel raised domestic scrap buying bids by USD 9/MT -

The largest ferrous scrap consuming steelmaker in China, Shagang Steel group has recently hiked its scrap buying prices in order to restock higher materials before the upcoming winter season. As per new price update on 21st Oct, Shagang is now paying 1,880 Chinese Yuan/MT (USD 284) for HMS scrap not lesser than 6 MM in thickness delivered to its works in Jiangsu Province in China.

The bids prices of ferrous scrap updated recently are hiked by USD 9/MT (Yuan 60) than the bid prices updated on 13 Oct'17.Earlier to this, the company was fetching scrap material at Yuan 1820/MT (USD 274).These prices are noted as the highest since last three years. The peak achieved earlier to this was at Yuan 1,860/MT during Aug-Sept'15.

Shagang steel has annual production capacity at 31.9 MnT iron, 39.2 MnT steel and 37.2 MnT rolled products. It manufactures leading steel products like wide heavy plate, hot-rolled strip coil, high-speed wire rod, large bundle of wire rod, ribbed steel bar, special steel round bar along with 60 series and more than 700 varieties with nearly 2000 specifications.

Following this price hike by Shagang Steel other predominant scrap recyclers like Maanshan Steel, Yonggang, Nanjing Steel and Zenith Steel have also heard to raise their ferrous scrap bid prices by equal margins. Most of them have started securing higher stock before upcoming winter amid healthier offer margins from buyers end.

Amid carrying stricter rules and affecting production capacities using BOF's many steel producers in north China are adopting new techniques to increase scrap ratio above 18-20% which is likely to increase use of domestic scrap in China.