China’s scrap market still characterized by overall sluggishness

In the context of the ongoing slide in the Chinese scrap market, domestic steel mills have slashed their purchase prices again in the past week, thus contributing to panic selling in the market. The continuing bearishness in China's finished steel market is still the main factor driving down scrap prices.

China's domestic scrap market has continued its slack trend during the past week, with a further slip observed in mills' purchase prices in various regions. At present, mainstream quotations of heavy scrap in Jiangsu Province are in the range of RMB 2,600-2,630/mt ($381-385/mt) while the purchase prices of some mills in this province for shredded scrap are at RMB 2,650/mt ($388/mt), both down by RMB 100/mt ($15/mt) week on week. Meanwhile, market prices of heavy scrap in Shandong Province and Tianjin have declined RMB 50-100/mt ($7-15/mt) to RMB 2,550-2,600/mt ($373-381/mt).

As a result of the continuous decrease in China's domestic finished steel market, various mills successively made downward adjustments to their purchase prices so as to cut their production costs, thus exerting a strong downward impact on the domestic scrap market. Looking at the current situation, given the soft demand for steel products and the increasing difficulties in performing sales, China's finished steel market is expected to move further down. Since it seems hard for the current steel market to halt its decrease in the short term, some mills have lately started to reduce their production, significantly impacting the market demand for scrap.

In addition, scrap prices in the Japanese market have registered a continuous fall in recent days, with HMS II now offered at Yen 28,000-29,000/mt ($303-314/mt) in the domestic market. Following the declining trend of Japan's domestic market, export quotations of Japanese scrap have also seen a minor reduction. It is heard that South Korea's Hyundai Steel has purchased HMS II from Japan at the level of 29,200/mt ($316/mt) FOB in recent days. Due to the rapid drop in China's domestic scrap market, prices of imported scrap are higher than those of domestic materials, causing stagnation in the flow of scrap imports into China.