China’s scrap prices go down in eastern regions

Over the past week China's domestic scrap market has still been characterized by bearishness, with a certain decrease observed in the eastern market under the impact of the rapid drop in local steel prices. Looking at the current situation, scrap prices are unlikely to see any improvement in their declining trend in the short term. In addition, China's scrap imports posted a decrease in August.

Scrap prices in China again recorded a slide during the past week. At present, mainstream quotations of heavy scrap in Jiangsu Province are in the range of RMB 2,550-2,600/mt ($374-381/mt) while the purchase prices of some mills in this province for shredded scrap are at RMB 2,600/mt ($381/mt), both down by RMB 50/mt ($7/mt) week on week. Meanwhile, market prices of heavy scrap in Shandong Province and Tianjin have declined to RMB 2,500-2,600/mt ($367-381/mt), with a general downward adjustment of RMB 50/mt ($7/mt) made by some local mills to their purchase prices.

Against the continuously falling prices in the finished steel market, the Chinese scrap market again stepped down during the past week. Coming up to the National Day holiday (October 1-8), traders are generally pessimistic as regards the future trend of the steel market and thus have seemed eager to cash in their materials, leading to the sharp drop in steel prices. Furthermore, under great cost pressure, mills have been seeking lower prices of scrap and other raw materials, announcing reductions to their purchase prices for scrap so as to push down the market levels. The domestic scrap market had remained relatively stable up to now despite the weak trading volume levels. Coming up to the holidays, some mills with insufficient scrap stocks have intended to supplement their stocks; however, commercial activity has continued to appear quite slack. Based on the current situation, steel inventory is expected to rally significantly during the National Day holidays, and so steel prices in the domestic market will continue to face great downward pressure, with the local scrap market accordingly expected to follow a downtrend.

According to the latest statistics released by the Chinese customs authorities, China's scrap imports totaled 1.089 million mt in August, down 277,000 mt or 21.3 percent month on month, hitting the second-lowest monthly figure for this year. From January to August, scrap imports to China amounted to 9.89 million mt, up 7.88 million mt or 392 percent compared with the same period last year. As a result of the still lofty scrap prices in the international market and the declining price levels in the domestic scrap market, it will be increasingly difficult to see deals for imported scrap concluded in China in the near future.