SteelOrbis Shanghai
Currently
scrap prices are somewhat high compared to that of
pig iron, therefore, many steelmakers cut their purchasing volume of
scrap, using
pig iron to produce crude steel.
Sources report that the highest price of
pig iron is about RMB 100/mt higher than that of
scrap prices. Under normal circumstances,
pig iron prices are RMB 300/mt higher than
scrap prices. Most steelmakers think the current
scrap price is too high and they keep small quantity of inventory. The purchasing volume of
Baosteel dropped to 70,000 metric tons last month. Moreover, the purchasing price is at RMB 1,940/mt ($241/mt), which is a low level. Apart from
Baosteel, other steelmakers also cut their purchasing prices, which led to a drop in market prices of
scrap.
At the end of February 28, Tuesday, heavy
scrap price at Zhang Jiagang was down RMB 20/mt weekly at RMB 1,940/mt ($241/mt), and that of Alashankou in Xinjiang Autonomous Region was retaining its RMB 1,700/mt ($211/mt) level.
Heavy
scrap is mostly consumed in Southern and Eastern
China, as most of the electric arc furnace using mills are in these regions. The crude steel output of Guangzhou Steel, Shaoguan Steel, Jinan Steel and
Laiwu Steel in these regions is down. Especially Jinan Steel's January crude steel output dropped 514,000 mt year on year to 850,000 metric tons in January. The decrease in output leads to a low demand for heavy
scrap. Therefore, heavy prices are in a downward trend.
According to the statistics,
scrap steel imports in Alashankou decreased 69.4 percent year on year and 41.8 percent month on month to 51,400 metric tons in January. Meanwhile, its value dropped 64 percent year on year to $8.3009 million. The decrease is due mainly to the changes in management policies on
scrap imports. The Ministry of Commerce and the Customs Administration further standardized the taxation policy on
scrap imports.
The latest
scrap imports reported to SteelOrbis were from
Shagang before the Spring Fetival at $213/mt CFR level.
Pig iron prices are expected to increase.
Scrap prices may also follow an upward trend in the long run due to the decreasing
scrap inventories. However, prices are expected to keep a weak trend this week.