Chinese scrap stocks decline over 6% due to rains and firm demand

The total volume of steel scrap held at the 289 scrapyards across China surveyed regularly by Mysteel dropped by 6.4% on month during July, largely due to firm scrap demand from domestic steel mills and the seasonal supply tightness caused by wet season rains.

 

As of July 27, the scrap yards - all qualified by the country's Ministry of Industry and Information Technology - were holding some 798,700 tonnes of processed steel scrap, according to Mysteel's latest survey.

During July, steel scrap consumption among the 61 blast furnace and electric-arc-furnace steel producers quizzed under another Mysteel survey averaged 5.57 million tonnes/day, higher by 4.1% on month or 4% on year.

"Although the widespread flooding and water damage has disrupted downstream steel demand, the trading of finished steel overall is still better than at the same period last year, and this is encouraging steel mills to maintain high production," a Shanghai-based market watcher commented. In addition, the still-high iron ore prices are rendering steel scrap much more competitive to BF producers, which encouraged them to consume more scrap in steelmaking, Mysteel Global noted.

On the other hand, the continuous hot and rainy weather over the past month or so have made it difficult for scrap suppliers to secure feed material. "We have raised our offers to attract more deliveries from local suppliers, but the scrap we can obtain was still limited," an official with a scrapyard in East China's Zhejiang province told Mysteel Global, adding that due to the shortage of scrap material, his yard could not operate at full capacity.

"The firm demand from steel mills has basically outpaced the volume we can process," he said.

With the wet season coming to an end in China's eastern and southern regions, market participants are now closely monitoring how the high temperatures during summer might impact domestic steel and scrap demand. "The domestic scrap price is likely to edge up further amid the remaining supply tightness and short-term recovery in steel demand. However, the room for a further incline may be limited," the market watcher predicted.

As of July 28, Mysteel's steel scrap price index was assessed at Yuan 2,546.5/tonne ($363.8/t), up Yuan 43.4/t on month, Mysteel's data shows.