Chinese steel scrap prices reach a 9.5-year high

Robust demand and bullish market sentiment have seen Chinese steel scrap prices keep on strengthening, with Mysteel's steel scrap price index reaching a 9.5-year high on April 28 of Yuan 3,435/t ($530.7/t) on delivery and including the 13% VAT, higher by Yuan 65/t on week or by Yuan 190.2/t on month.

"The main reasons behind the rising prices of steel scrap are the roaring demand for feeds among domestic steelmakers and the continuing strength of finished steel prices," a Shanghai-based market watcher commented. "Also, the rise in scrap prices has shadowed the increase in prices of other steelmaking raw materials such as iron ore and coke," she added.

As of April 28, China's national price for HRB400E 20mm rebar was still at its 9.5-year high of Yuan 5,230/t, up Yuan 138/t on week or Yuan 323/t on month, according to Mysteel's assessment. As of the same day, Mysteel PORTDEX 62% Australian Fines in Qingdao had also climbed by Yuan 62/t on week or Yuan 173/t on month to Yuan 1,318/t FOT, which was also a record high since Mysteel launched the survey in April 2013. All prices include the 13% VAT.

"Although only two days remain before the Labour Day holiday (over May 1-5), the domestic blast furnace and electric-arc-furnace steel producers have continued to lift their scrap procurement prices to attract more deliveries," the analyst said Thursday, pointing out that the mills need to hold sufficient stocks to ensure they can operate smoothly over the break.

For example, Mysteel's survey showed that on April 28, over 35 mills across the country had raised their steel scrap buying prices by Yuan 10-100/t. For a steel mill in East China's Jiangsu province, the increase was its second price rise this week and came only three days after its previous rise.

"This was because our previous price increase failed to attract more deliveries to our plant (so) we had no choice but to pay more to our suppliers," a procurement official with the mill told Mysteel Global.

Interestingly, scrap traders don't feel the same necessity to increase their scrap procurement prices, the Shanghai analyst noted, as they seem confident about the post-holiday demand and expect scrap prices to move upward further.

"Instead of delivering scrap to plants, we are focusing on building up our own inventories now, so that we can have sufficient materials for post-holiday sales," a scrap trader in East China's Zhejiang province commented.

As of April 28, daily scrap deliveries to the 15 domestic steel mills under Mysteel's survey averaged 5,940 tonnes/day, up slightly by 2.2% on week.

Written by Lindsey Liu, liulingxian@mysteel.com

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