MYSTEEL: China qualified yards' scrap stocks fall 1.8% m-o-m

Mysteel Global: Ferrous scrap inventories sitting in scrap yards throughout China dropped steadily during August, as the yards became more eager to sell their stocks, while the collection of raw scrap became increasingly difficult, the findings of Mysteel's latest survey suggest.

As of August 23, the inventories of processed and unprocessed steel scrap held by the 584 Chinese steel scrapyards qualified by the country's Ministry of Industry and Information Technology totalled 952,870 tonnes, lower by 1.8% from the end of July, according to Mysteel's tracking.

The slump of steel scrap prices earlier this month triggered panic selling among steel scrap suppliers in China, even though the demand for scrap among steelmakers remained dull, as reported.

On August 27, the country's national composite steel scrap price was assessed by Mysteel at Yuan 2,396.8/tonne ($336.1/t) including the 13% VAT, lower by a significant 9.4% from the end of July.

"Steel scrap suppliers were bearish about the market, so they were actively delivering their scrap materials to steel mills (in the first half of August) for fear that scrap prices might keep falling," a market analyst based in Shanghai said.

"However, steelmakers that were struggling with negative margins chose to reduce or even halt production, and so were unwilling to accept any deliveries from scrap suppliers," the analyst added. "As such, the decline in the inventories among scrapyards was moderate," he said.

On the other hand, steel scrap collectors had held back sales to processors as the previous plunge in scrap prices had squeezed their profit margins severely, Mysteel Global noted. "Even though prices have started to rebound of late, the collectors were still reluctant to sell, hoping for a further recovery in prices," the Shanghai analyst said.

Unable to source more scrap materials from suppliers, domestic scrapyards are expected to see their scrap inventories decrease further in the days ahead, Mysteel's survey suggests.

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