Steel scrap stocks among China's qualified yards at 1-year low

Inventories of steel scrap held by Chinese scrapyards have fallen steadily so far this month as weakening scrap prices countrywide have prompted most scrap processing companies to actively sell their stocks, the results of Mysteel's latest survey show.

As of October 20, 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 totaled 1.04 million tonnes, the lowest since mid-October last year, according to Mysteel's tracking.

Earlier this month, domestic steelmakers ramped up steel scrap procurement to replace the feed materials they consumed during the eight-day holiday for Mid-Autumn Festival and National Day that ended on October 6, Mysteel Global noted.

Meanwhile, to shave their production costs amid their widening losses on steel sales, most steel mills have kept pressing scrap suppliers to lower their selling prices this month, market sources observed.

For example, since October 10 Shagang Group, China's leading electric-arc-furnace (EAF) steelmaker headquartered in East China's Jiangsu province, has cut its scrap buying prices no fewer than three times within two weeks, clipping these by a total of Yuan 110/tonne ($15.4/t), as Mysteel Global reported.

As of October 24, Mysteel's national steel scrap price index was nearing a five-month low of Yuan 2,870.3/t including the 13% VAT after falling 3.7% from the end of September.

Under such circumstances, steel scrap yards have adopted a fast-in, fast-out policy regarding their stocks and have rushed to deliver their scrap to steelmakers for fear that prices may drop further, Mysteel's survey showed.

As a result, the scrapyards' inventories are being transferred to steelmakers' works at a faster pace, with Mysteel's tracking showing that scrap stocks among domestic steel have mounted, even though their scrap consumption had grown.

As of October 19, total steel scrap stocks held by the 61 blast furnace and EAF steel mills under Mysteel's weekly tracking had touched a near four-month high of 1.97 million tonnes, higher by some 5.8% from the end of September.

Written by Anthea Shi, shihui@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com

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