Posted on 06 Jun 2024
Ferrous scrap prices in China are seen weakening in June, dragged down by the likely decline in scrap consumption among steelmakers, Mysteel's latest monthly report suggests.
Despite the central government's recent introduction of a package of incentive policies to support the domestic economy, steel demand from end-users is still expected to retreat this month, the report predicts, pointing out that the heavy rains at this time of year, combined with the growing summer heat, may cause steelmakers to rein in production further.
As of May 31, China's national composite steel scrap price was assessed by Mysteel at Yuan 2,893.6/t ($406.3/t) including the 13% VAT, higher by Yuan 30.1/t on month. Entering this month, the price has lost some ground during the past few days to reach Yuan 2,866.3/t as of June 4.
Heavy losses on their steel sales in late May had pressed many electric-arc-furnace (EAF) steelmakers to scale back output, as reported. The mills may continue to curtail or even halt production in coming weeks unless they see a marked improvement in steel demand, Mysteel warns.
By the end of May, the average capacity utilization among the 87 independent EAF steel mills under Mysteel's tracking had snapped a five-week rise to drop by 1.47 percentage points on week to 55.93%.
Meanwhile, compared with hot metal, steel scrap remains more expensive as a steelmaking raw material, which will prompt blast furnace steel mills to reduce their use of scrap in production, the report noted.
On June 4, for example, the cost of making steel using scrap among integrated mills in East China's Jiangsu province averaged Yuan 2,533/t excluding the 13% VAT, higher by some Yuan 26.6/t compared with using hot metal, according to Mysteel's assessment.
Their concerns about lukewarm demand from steel end-users have led domestic steelmakers to be cautious about replenishing their feed stocks, and as a result, steel scrap suppliers have watched the stocks at their yards steadily mount, according to Mysteel's report.
By the end of last month, total inventories of processed and unprocessed steel scrap held by the 584 Chinese steel scrapyards qualified by the country's Ministry of Industry and Information Technology stood at 985,880 tonnes – a more than three-month high and higher by 3.1% compared with end-April.
Nevertheless, steel scrap dealers are still facing difficulties collecting scrap materials due to the reduced business activity of steel end-users, the report pointed out. This means that scrap availability in the domestic market is far from loose, it noted, predicting that this will continue to provide some support for the scrap prices.
Source:Mysteel Global
