Steel scrap stocks at China's licensed yards fall 17% m-o-m

The stocks of processed and unprocessed steel scrap held by the 291 licensed steel scrapyards in China decreased for a second month during November, tumbling by 17% on month. Chiefly responsible for the decrease was active procurement among domestic steelmakers plus a decrease in recycling activities in the market, sources said.

As of November 27, the scrap yards - all qualified by the country's Ministry of Industry and Information Technology - were holding 1.26 million tonnes of processed and unprocessed scrap. Within the total, inventories of processed scrap were lower by 20.2% on month at 762,300 tonnes, and those of unprocessed were down by 11.8% on month at 500,200 tonnes, the survey showed.

Significantly, the largest fall in stocks was among the 113 qualified scrap yards in East China whose scrap inventories plunged by 31.8% on month, Mysteel's data shows.

"Since the beginning of November, the strengthening of finished steel prices has improved most domestic steel mills' profit margins, encouraging them to maintain high production, especially those mills in East and South China where temperatures are still mild enough to permit outdoor construction activity," a Shanghai-based market watcher commented.

As of November 26, the average capacity utilization rate among the 71 independent electric-arc-furnace (EAF) steelmakers sampled in another Mysteel survey increased for the third week, rising by another 0.55 percentage point on week or 1.58 percentage points on month to 59.48%.

Also last month, total steel scrap consumption among the 61 steel mills Mysteel samples nationwide including both blast furnace and EAF plants averaged 6.26 million tonnes as of November 26, up 12.2% on month or 13% on year, another survey showed.

"Finished steel prices began to show signs of softening in late November, while scrap prices still hovered at multi-year highs, supported by the current firm demand as well as high prices of other raw materials. Nonetheless, some EAF producers can still enjoy margins of over Yuan 100/tonne ($15.2/t) producing rebar," she added.

In addition, as most mills are accumulating scrap inventories for winter, steel scrap demand is likely to continue keeping strong for the near term, Mysteel Global noted.

As of December 1, China's HRB 400 20mm dia rebar price, an indicator of market movement, had increased by Yuan 219/t on month to Yuan 4,079/t, according to Mysteel's assessment. Mysteel's steel scrap price index also edged up by Yuan 112.8/t on month to refresh its 7.5-year high of Yuan 2,723.2/t, both including the 13% VAT.

Written by Lindsey Liu, liulingxian@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.