Posted on 16 May 2022
Only three days after its last steel scrap price reduction, Shagang Group (Shagang), China's leading electric-arc-furnace (EAF) steelmaker, has lopped another Yuan 50/tonne ($7.4/t) off its ferrous scrap buying prices for deliveries starting May 13, a move that Chinese market sources interpreted as the mill's response to smoother scrap deliveries and softening domestic steel prices recently.
With the latest cut, Shagang, headquartered in East China's Jiangsu province, is paying Yuan 3,920-3,980/t including the delivery and the 13% VAT for domestically-produced HMS grade steel scrap, it advised suppliers.
"After its previous price cut on May 10, steel scrap deliveries to Shagang have surged," a Shanghai-based market watcher told Mysteel Global, adding that the previous tightness in steel scrap supplies has apparently eased recently.
As of May 12, steel scrap deliveries to Shagang's Zhangjiagang steelworks had leapt by 20.5% from May 10 or 73.5% on week to average a fairly high 23,497 tonnes/day, a market watcher close to the steelmaker observed.
On the other hand, actual consumption of finished steel in China has failed to live up to market expectations, and it's this factor – together with the relative stability of steel output these days – that is putting pressure on domestic steel prices, Mysteel Global was told.
With the decline in steel prices continuing to squeeze the profit margins of all steelmakers including Shagang, "it shouldn't be a surprise that the mills have had to pass on the pain of the thinning profits they're suffering to their raw materials suppliers, including those selling steel scrap," she added.
As of May 12, China's national average price for HRB400E 20mm dia rebar, a bellwether of steel market sentiment, had fallen by Yuan 165/t on week to Yuan 4,977/t and including the VAT, Mysteel's assessment found.
On May 13, news of Shagang's scrap price cut immediately dragged down the spot prices of most ferrous scrap grades in Zhangjiagang, with that of 6-8mm common-grade carbon steel scrap slipping by another Yuan 20/t on day to Yuan 3,330/t excluding the 13% VAT, according to Mysteel's database.
Source:Mysteel Global
