WEEKLY: China steel scrap prices dip further as demand weakens

Chinese steel scrap prices continued moving downward last week, dragged by the persistent decline of finished steel prices, while domestic steelmakers' demand for ferrous scrap materials weakened as well, Mysteel's latest survey showed.

As of June 21, the country's national composite steel scrap price index was assessed by Mysteel at Yuan 2,831.2/tonne ($390/t) including the 13% VAT, lower by a small Yuan 4.3/t on week.

The falling steel prices kept squeezing the profit margins of steel mills, forcing them to ask for further reductions in scrap selling prices from suppliers, Mysteel Global learned.

For example, China's national spot price of HRB400E 20mm dia rebar had lost Yuan 52/t or 1.4% on week to sit lower at Yuan 3,673/t including the 13% VAT by June 21, according to Mysteel's assessment.

Unable to sustain heavy losses on steel sales, domestic electric-arc-furnace (EAF) steelmakers scaled back their production last week, while scrap demand from blast-furnace (BF) mills barely showed any growth due to its weak cost effectiveness against hot metal, Mysteel's survey showed.

Consequently, the daily consumption of steel scrap among the 300 BF and EAF steel mills under Mysteel's tracking averaged 545,150 tonnes/day over June 17-21, down by 0.5% on week.

However, Chinese steel scrap prices could still gain some support from its tight availability in the domestic market, Mysteel Global noted. The collection and processing of ferrous scrap at scrapyards across the country have been frequently disrupted by adverse weather conditions recently, market sources observed.

The volume of steel scrap arriving at the sampled 300 steel mills edged up by 0.3% on week to reach 534,454 t/d during June 17-21, but it was still insufficient to meet the production needs of these plants, Mysteel's survey showed.

By June 21, the total inventories of steel scrap held by the same 300 steelmakers under Mysteel's tracking dropped by 1.7% on week to 5.1 million tonnes, which would last them for 9.3 days at their current usage rate, shorter by 0.2 day from the previous period, according to Mysteel's assessment.

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