China's scrap import situation

China’s scrap import situation

For the first four months of 2005, the U.S., Japan, Australia, Russia and several Far East countries were among the main exporters of steel scrap to China. The largest global scrap supplier, the U.S., exported 10.92 million tons of scrap in 2004. Of that number, 40% of went to China and Korea, 30% to Canada and Mexico, while the remaining 30% went elsewhere. As the largest scrap consumer in the world, China imported 2.78 million tons of scrap from the U.S., accounting for 25% of the U.S.'s total export quantity. As for scrap prices, scrap suppliers on the U.S. east coast quoted the highest export price of HMS1 & shredded scrap to Asian countries for the first quarter of 2005. Prices reached $295-305/ton C&F during the first quarter, but have since declined to $290-300/ton. Furthermore, the price of superior structural scrap (BONUS) has decreased below $300/ton in Mid-February 2005. H2 scrap prices from Japan to China have risen nearly 12%, from $245/ton before the Spring Festival to $275/ton in Mid-March 2005. As China's neighbor, Japan's H2 scrap export price is associated closely with the prices of finished steel products in China's domestic market. During the past few weekends, the latest H2 scrap price has decreased to around $250/ton, down 9% against its peak price due to the comprehensive price decrease in China scrap market. In light of this situation, some Japanese scrap suppliers have temporarily stopped signing scrap supply contracts, choosing to adopt a wait-and-see attitude instead. The transaction situation of Chinese steelmakers that have imported scrap from other countries can be summarized as follows: The highest transaction price of H2 scrap in Japan is $278/ton, that of shredded scrap in America has been $300/ton, and that of 80%-20% mixed HMS in America has been $295/ton. As for superior scrap, a few transactions have been concluded because major steelmakers have shown a reluctance to accept scrap prices of more than $300/ton. In year-on-year terms, China's scrap imports dropped off considerably in the first quarter of 2005. The main reasons can be summarized as follows: 1. The scrap price in international markets has operated steadily at a high level, with slight price increases. In addition, the ex-factory price of finished steel products in and out of China is still higher than that of the market price. Driven by scrap market consumption, scrap import will rely on finished steel products' prices in major consumption markets. Specifically, for the first quarter of 2005 the global scrap market maintained 2004's trend of rising prices. International scrap price quotations have approached those of last year, while the quotations in China's domestic steel market are far lower against than the prices prior to Beijing's implementation of various macro-controls. Thus, global scrap is concentrated in America and Europe, where the price of finished products has been high, and some Southeast Asia countries (India and Thailand etc.) 2. At the beginning of 2005, the scrap inventory of major steelmakers in China was 3.61 million tons, up 400 thousand against that of 2004. This shows that the social scrap inventory has been rich. Meanwhile, in order to cope with the price rise situation in the international scrap market, China's steel enterprises have taken various positive measures that have improved steel recycling in China. According to the analysis, the social scrap recycling quantity is forecasted to reach 38 million tons in 2005, up about 15% against that of 2004. As crude steel output has increased by 11% against that of 2004, Chinese steelmakers' reliance on imported scrap will be alleviated slightly. 3. Steel enterprises' composite macro-control has caused the social effect and sentiment panic on scrap market, which has further led to the comprehensive price decrease and thus restrained scrap imports.