China's ferrous scrap imports spike in April

Posted on 28 May 2021

Chinese ferrous scrap imports nearly trebled in April from the previous month as steel mills and trading firms increased purchases after initial trial shipments successfully cleared customs.

April imports rose by 186pc to 60,696t from March, taking January-April imports to 85,832t, according to Chinese customs data. China's ferrous scrap imports have slowly picked up their pace since the country ended a ban on imports with stricter standards on 1 January.

Buyers became more active in markets after the lunar new year holidays in February. Some trading firms took long positions with a bullish outlook and more mills started to book trial orders. But the total volume was still far below market expectations because of the strict inspection process. Some larger scrap trading firms are not offering into China because any rejection by customs would create problems.

Nearly 95pc of the imports have been a higher grade scrap from Japan and South Korea. Scrap from these two origins has higher quality and can be shipped in smaller bulk vessels. April imports from Japan and South Korea both increased by more than 200pc from March, while imports from other origins all fell.

Chinese buyers were seeking supplies from Europe and US to boost their scrap imports as supplies from Japan are not enough to fulfil China's demand. Several trial orders of shred cleared customs successfully. But the main grade HMS1/2 80:20 might not be as easy to import because the mixture of different thicknesses could be a challenge for the customs inspection process.

May imports are expected to remain at a similar level or be even higher than April. But buying interest has dropped off with the sharp fall in China's steel markets since mid-May, with China's government urging the metal sectors to stabilise prices.

Chinese domestic scrap prices have followed steel prices lower. Heavy melted No.3 scrap purchased by Shagang has fallen by 600 yuan/t ($94/t), or 14.3pc, to Yn3,590/t including 13pc value-added-tax (VAT) since mid-May. The price is equivalent to $498/t without VAT and was much lower than seaborne scrap prices. Price uncertainty has kept most market participants sidelined.

The import data is for ferrous scrap HS codes 720410, 720441 and 720449 that excludes categories for stainless steel scrap and alloyed steel scrap. 

Source : Argus