MYSTEEL: China steelmakers reduce scrap use to cut costs

Chinese blast furnace (BF) steelmakers are tending to use less ferrous scrap in their production these days because compared with hot metal, scrap materials are more expensive as a steelmaking raw material, Mysteel's latest survey showed.

Over 28 June- 4 July, the volume of steel scrap used by the 130 BF mills under Mysteel's tracking accounted for just 14,39% of all feed materials, lower by 0.37 percentage points on the month.

During the same period, total steel scrap consumption among these sampled 130 mills averaged 1.36 million tonnes/week, lower by 1.5% from that recorded a month earlier, according to the survey.

"The large drop in the prices of iron ore and coke in late June significantly improved the cost-effectiveness of hot metal, making steelmakers more willing to use it since then," a market watcher based in Shanghai said.

By the end of June, Mysteel SEADEX 62% Australian Fines sat at $106.6/dmt CFR Qingdao, down by $8.4/dmt on month, while China's composite metallurgical coke price had dropped by Yuan 42.9/t ($5.9/t) on month to reach Yuan 1,961.7/t including the 13% VAT, Mysteel assessments show.

On the other hand, Chinese steel scrap suppliers have found it more difficult for collect steel scrap during the past few weeks because the hot and humid weather in summer has hindered scrap sorting and transportation across the country, which made domestic scrap prices more resilient than those of other materials, as reported.

By July 9, the cost of making steel using steel scrap in East China's Jiangsu province averaged Yuan 2,553/t excluding the 13% VAT, higher by Yuan 55.6/t than that using hot metal, according to Mysteel's assessment.

Under such circumstances, domestic steelmakers have slowed their procurement of steel scrap, Mysteel's other survey showed. They also saw their scrap stocks steadily draw lower.

As of July 5, the steel scrap inventories held by the 130 BF mills Mysteel tracks totalled 1.7 million tonnes, down by 6.2% on the month.

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