MYSTEEL: China's ferrous scrap prices may soften in Aug

Mysteel Global: Ferrous scrap prices in China will probably continue falling this month, under the pressure of weakening finished steel prices as well as shrinking demand for scrap from steelmakers, according to Mysteel's recent report on the market.

Steel scrap prices throughout China dropped markedly in July and, entering this month, have yet to display any upward momentum, Mysteel's survey showed. As of August 6, China's national composite steel scrap price was assessed by Mysteel at Yuan 2,613.8/tonne (364.5/t) including the 13% VAT, lower by Yuan 203.3/t or 7.2% on month.

Domestic steel prices fell rapidly last month amid the panic selling of rebar by traders trying to clear their yards before new national standards for rebar come into force, as reported. "In August, the market will still try hard to consume the relatively high inventories of old-standard rebar, so prices of steel generally are likely to continue falling," Mysteel's report warned.

By August 6, China's national spot price for HRB400E 20mm dia rebar had dropped by 7.7% on month to reach Yuan 3,380/t including the 13% VAT, Mysteel assessed.

"Ferrous scrap prices will likely follow the decline of finished steel prices," the survey suggested.

On the other hand, in late July many domestic steelmakers had announced unscheduled maintenance stoppages, aiming to ease the potential rebar surplus by reducing their production, Mysteel Global learned. This will lead to a decrease in steel scrap consumption, Mysteel's report pointed out.

At the beginning of this month, the average capacity utilization rate among the 87 independent electric-arc-furnace (EAF) steelmakers under Mysteel's regular tracking averaged 41.95%, lower by a 7.08 percentage points on month from the first week of July.

However, the decrease in steel scrap prices is expected to be slower than that of finished steel, since scrap supply remains generally tight, according to the report.

By the end of July, the total of steel scrap inventories held by the 584 Chinese steel scrapyards qualified by the country's Ministry of Industry and Information Technology still hovered around a two-year low at 963,510 tonnes, according to Mysteel's tracking.

"The summer heat will remain intense in August, which will continue to constrain the activities of steel end-users, and scrap generation will be limited as well," the report said.

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