Steel scrap use among China's blast furnace mills rises slightly

The consumption of steel scrap by Chinese steel mills hosting blast furnaces (BFs) rose slightly this week, with the scrap use in crude steel output among the 130 BF mills under Mysteel's regular survey edging up by 0.2 percentage point on week to 12.03 tonnes as of February 16, reversing six weeks of declines. The scrap ratio rise resulted from the surveyed BF mills' higher steel output and scrap's price competitiveness against production cost of hot metal, survey participants suggested.

"Before Shagang Group shaved its scrap buying prices on Tuesday, some domestic BF mills had been reducing scrap consumption in steelmaking, but now, with procurement costs now being lower, they have kept their scrap ratios unchanged or even lifted them a bit," a Shanghai-based market watcher commented.

By February 16, the price of 6-8mm common-grade carbon steel scrap in Zhangjiagang city in East China's Jiangsu, for example, had weakened by Yuan 30/tonne ($4.4/t) on week to Yuan 2,820/t excluding the 13% VAT, Mysteel's data showed.

In contrast, as of the same day, the average cost for producing hot metal also in Jiangsu increased by Yuan 17.9/t on week to Yuan 2,899.6/t excluding the 13% VAT, according to Mysteel's calculations. As a result, the price spread between hot metal and scrap in Jiangsu expanded by Yuan 47.9/t on week to Yuan 79.6/t as of Thursday.

Besides scrap prices being more competitive, the recent improvement in steel market sentiment stimulated by the rise in steel demand also encouraged some steel mills across the country to ramp up production. This led to these mills' increasing demand for scrap, Mysteel Global noted.

In tandem, the blast furnace capacity utilization rate among the 247 Chinese steel mills under Mysteel's other survey increased by 0.82 percentage point on week to 85.75% as of February 16.

Higher steel output, plus the recovering scrap ratio in BF mills, saw total scrap consumption among these 130 surveyed BF mills rise by 2.2% or 20,700 tonnes on week to 972,800 tonnes by Thursday.

Written by Lindsey Liu, liulingxian@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com

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