Local Chinese scrap prices fall as bearish mood grips market

The recent developments in both the futures and physical markets in China, with sharp drops in prices and deterioration in sentiments among market players as regards the future market prospects, have continued to drag down the positions of Chinese scrap suppliers. With the continued squeezing of their margins, Chinese steelmakers have been seeking to reduce their scrap purchase prices further. In particular, as SteelOrbis reported earlier, on November 3 Jiangsu-based Shagang Group, China’s largest private steelmaker, cut its scrap purchase prices for the third time since October 26. On balance, this time the company has lowered its bids for scrap by RMB 80/mt ($12.5/mt) to RMB 3,630/mt ($567/mt) delivered, including 13 percent VAT. Concurrently, the downward trends in Chinese prices of coke, coking coal and iron have exerted pressure on scrap prices. Nevertheless, as supply of scrap is unlikely to improve significantly amid the muted activity in the import segment, scrap prices in China are expected to fluctuate within a limited range in the coming week. Meanwhile, ex-Japan scrap has remained out of the range of interest of Chinese steelmakers, with Japanese scrap suppliers likewise not interested in exporting to China. Specifically, while Japanese suppliers are hardly ready to sell scrap lower than $600-610/mt CFR, Chinese customers are seeking to pay not higher than $500/mt CFR, decreasing their bids for import material by at least $10-15/mt during the past week.

Average domestic HMS scrap prices in China are at RMB 3,686/mt ($576/mt) ex-warehouse, decreasing by RMB 97/mt compared to October 27, according to SteelOrbis’ information.

Average scrap prices in China’s main markets are presented in the following table.

$1 = RMB 6.4079