China: Steelmakers' Scrap Stocks Refresh Record Low

Total stocks of steel scrap at the 61 steel mills comprising both blast furnace and electric-arc-furnace producers which Mysteel monitors regularly across China decreased by another 241,100 tonnes or 12.1% on week to reach 1.75 million tonnes as of February 20, a new low since Mysteel launched the survey in June 2017, according to the latest survey.

The mills' existing stocks will be sufficient for 12.2 days of those mills' daily consumption, based on their present utilization rate, or 0.5 day shorter than in the prior week, the survey results indicated.

"We observed that the delivery volumes of steel scrap to steel plants have yet to improve significantly," a Jiangsu-based market watcher told Mysteel.

At present, most scrap collection and recycling enterprises have not resumed normal work amid the shortage of manpower and basic medical suppliers, plus transportation remains disrupted in many parts of China, Mysteel Global noted. As a result, the supply tightness has led to the further reduction in steel mills' scrap stocks.

On the other hand, the steady accumulation of finished steel stocks amid the sluggish downstream demand had forced domestic steelmakers to ease back on their steel output as the stocks have kept dragging down domestic finished steel prices. At the same time, the plunge in steel prices had imposed pressure on the steel scrap market and led scrap prices to retreat as well.

As of February 21, Mysteel's national average benchmark price for HRB400 20mm dia rebar had declined by another Yuan 64/tonne ($9.1/t) on week to Yuan 3,666/t, while as of the same day, Mysteel's steel scrap price index was lower by Yuan 12.5/t on week at Yuan 2,542.6/t, both including the 13% VAT, Mysteel's data showed.

The weakening in both steel scrap demand and supply will likely result in scrap prices staying rangebound in the coming week, Mysteel predicts. However, with local Chinese authorities launching a series of measures to support the resumption of business and to free up transportation, market participants say they are seeing some positive signs for the future market.

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