China’s scrap imports surge strongly in February

The Chinese scrap market has continued its bearish trend over the past week, against the background of an overall sluggishness in market trading. Meanwhile, China's scrap imports posted a remarkable rise in February.

Last week, China's domestic scrap market maintained its weak fluctuating trend, with actual deal prices sliding down somewhat. At present, mainstream quotations of heavy scrap in Jiangsu Province are in the range of RMB 2,300-2,350/mt ($337-344/mt), while the purchase prices of some mills in this province for shredded scrap stand at RMB 2,450/mt ($359/mt), with the purchase prices of heavy scrap in Hebei Province declining RMB 50/mt ($7/mt) to RMB 2,250-2,300/mt ($329-337/mt).

With caution reigning across the domestic finished steel market, most players are pessimistic as regards the future. Mills seem conservative in their purchases of raw materials, and some of them have even halted their purchases of domestic origin scrap and have started buying imported scrap materials instead. Meanwhile, traders have suffered heavy losses following the rapid drop in scrap prices from the end of 2008 to the beginning of 2009. As a result, traders prefer to stand aside from the market, which helps explain the poor levels of commercial activity seen in China's domestic scrap market recently.

Considering the relatively low price levels of imported scrap, both mills and traders have begun to show a certain interest in scrap imports. Currently, export quotations of Japanese H2 scrap to China are around $225-235/mt CFR, while import prices of US HMS (1&2 80:20) to China are at $235/mt CFR. However, Japan's domestic scrap prices have been moving on a rising trend in recent days, thus leading to an increase in export quotations of Japanese scrap to China and South Korea, which in turn has resulted in a reduction in the number of deals being concluded.

According to the latest statistics, China's scrap imports for February totaled 1.126 million mt, up 62.5 percent month on month and up 941,000 mt or 509 percent year on year, marking the highest monthly import volume since September 2005. Imports from Japan amounted to 560,000 mt, with the average import price at $318/mt; meanwhile, imports from the US reached 239,000 mt, with the average import price at $310/mt. Imports from the above two countries accounted for 71 percent of the total.