Chinese steel scrap stocks rise on higher deliveries

Steel scrap inventories held by domestic steel mills edged up during September 8-14 as the mills ramped up procurement of the feed material while their scrap consumption was largely flat, Mysteel's latest survey showed.

Steel scrap stocks at the 61 Chinese blast furnace (BF) and electric-arc-furnace (EAF) steelmakers under Mysteel's coverage increased mildly by 20,236 tonnes or 1.2% on the week to reach 1.76 million tonnes as of September 14 after dipping in the prior week.

Chinese steelmakers have started to accelerate scrap purchases to build up stocks for their production during the country's Mid-Autumn Festival and National Day holidays over September 29-October 6, Mysteel Global noted.

As such, steel scrap deliveries to the 61 sampled steelmakers averaged 2,671 tonnes/day during September 8-14, higher by 99.5 t/d or 3.9% on the week, the survey showed.

On the other hand, the daily average scrap consumption among these mills were generally stable at 2,622 d/t during the same period, up by just 0.36% on the week, according to the survey.

"Persistent negative margins have cooled steelmakers' interest in lifting production," a market analyst based in Shanghai noted. As of September 15, the 40 independent EAF mills Mysteel tracks suffered an average loss up to Yuan 138/tonne ($18.9/t) on their sales of all finished steel products.

Mysteel's other survey showed that the capacity utilization rates of the 87 domestic EAF mills it tracks averaged 53.3% over September 8-14, lower by 0.3 percentage points on week.

Under such circumstances, as of September 14, the scrap inventories held by the 61 mills were sufficient to last 11.1 days of their use, 0.3 days more than the prior week, according to Mysteel's assessment.

Shrinking profit margins also prompted domestic steelmakers to press scrap suppliers to lower selling prices so that they could shave production costs, Mysteel Global learned.

This led domestic steel scrap prices to weaken, with Mysteel's national steel scrap price index losing Yuan 10/t on week to reach Yuan 2,997.8/t including the 13% VAT as of September 15.

Written by Anthea Shi, shihui@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.