Sales surge triggers decrease in steel scrap Stocks at China's qualified yards

After rising continuously since mid-November last year, inventories of ferrous scrap held by Chinese scrap yards have fallen recently, Mysteel's latest survey shows, as softening domestic scrap prices triggered panic selling among scrap processors.

As of January 19, the stocks of processed and unprocessed steel scrap held by the 584 Chinese steel scrapyards qualified by the country's Ministry of Industry and Information Technology had dropped by 1.6% on week to 1.04 million tonnes and ending a nine-week climb. Compared with end-December, the volume was about 1,500 tonnes higher, however.

During the past two months, Chinese steelmakers have been building up their stocks of steel scrap to ensure that they have enough feed materials for their production during the Chinese New Year holiday in mid-February when scrap dealers will temporarily close their offices, Mysteel Global learned.

"By mid-January, most mills have restocked sufficient scrap so their buying interest has cooled," a market watcher based in Shanghai said, pointing out that mills have started announcing reductions in their purchase prices.

Mysteel's other survey showed that by January 23, total steel scrap inventories held by the 300 sampled blast furnace (BF) and electric-arc-furnace (EAF) steel mills across China had mounted to 7.04 million tonnes, higher by 16.5% on month. The stocks would be sufficient to last them for 11.2 days at their present rates of consumption, Mysteel assessed.

Under these circumstances, Chinese steel scrap prices have weakened over the past fortnight, with Mysteel's national steel scrap price index sitting at Yuan 3,043.9/tonne ($429.3/t) including the 13% VAT as of January 23, lower by Yuan 18.2/t on week.

The weakening of steel scrap prices made scrap processors and dealers scramble to sell their scrap materials to steelmakers, fearing that the value of their stocks may depreciate further, Mysteel Global noted.

During January 15-19, the volume of steel scrap delivered to the 300 BF and EAF mills Mysteel tracks averaged 618,331 tonnes/day, the highest level since early April last year.

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