Chinese scrap prices still suffer from poor performance of steel market

Due to the general sluggishness in China's steel market, the domestic scrap market has in general continued to trend downward in the past week. It is thought that Chinese mills will reduce their purchase volumes and lower their purchase prices for scrap in the coming period.

Over the past week China's scrap market has trended downward in general, with some few exceptions. Current mainstream quotations of heavy scrap in Jiangsu Province stand at the level of RMB 2,800-2,850/mt ($413-420/mt), down by RMB 100/mt ($15/mt), while the purchase prices in this province for shredded scrap are at RMB 2,900-2,950/mt ($428-435/mt), down by RMB 50/mt ($7/mt) week on week. In Hebei Province, mainstream purchase prices of steel mills for heavy scrap are at RMB 2,850-2,900/mt ($420-428/mt), down RMB 50/mt ($7/mt) week on week. Meanwhile, market prices of heavy scrap in the northeastern region are standing at RMB 2,850-2,950/mt ($420-434/mt), unchanged week on week, with scrap prices in Hubei Province standing at RMB 2,850-2,900/mt ($421-428/mt), with the upper end down by RMB 100/mt ($15/mt) week on week.

China's scrap market has continued to be affected by the poor performance of the domestic steel market. With the rebar price dropping to RMB 3,660/mt ($540/mt) and the HRC price down to RMB 3,920/mt ($578/mt) in the Shanghai market, the scrap price have continued to trend downward in line with the lower steel prices. Due to high production costs, some mills have incurred losses and more medium- and small-sized mills have started to cut or halt production, leading to a reduction in demand for scrap. In this context, it is thought that domestic scrap prices may trend down further in the coming period.

In the past week, quotations of overseas scrap have continued to indicate a recovery. Current scrap import quotations are too high to be accepted by the Chinese mills. At present, quotations of ex-US scrap are reported to have increased to $370-375/mt CFR. It is expected that ex-US export quotations will continue to climb up in line with the upward trend in the US domestic scrap market. At the same time, ex-Japan H2 scrap offers to China have increased to $350/mt CFR.