Local Chinese scrap prices show divergent trends amid market uncertainty, imports on hold

With the Chinese government’s recent announcement regarding production levels, coupled with the increasingly serious Covid-19 situation in the country, the local scrap market in China has lacked direction. Specifically, this week scrap purchase prices across China’s main markets have shown divergent trends. With regard to the current developments, scrap imports have become even more unattractive for Chinese steelmakers, though within the past week import offers have declined to some extent. Accordingly, Japan-based suppliers are said to have come down in their HS scrap offers to China to $600/mt CFR and below, versus $590-610/mt CFR a week ago. “Scrap and BPI [basic pig iron] are not workable at this time in China, where buyers are very far from sellers’ offers,” a key Asia-based trader stated. Chinese customers, in turn, are seeking to pay not higher than $540/mt CFR, with some of them even voicing $500/mt CFR.

On balance, average domestic HMS scrap prices in China are at RMB 3,695/mt ($571.9/mt) ex-warehouse, having increased by RMB 11/mt compared to July 28, according to SteelOrbis’ information.

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

During the given week, sharp losses in futures prices in China have encouraged some Chinese steelmakers to revise their bids for scrap downwards. However, the recent announcement of the central government that China would ease its efforts as regards carbon and steel output reductions have made some Chinese customers, on the contrary, accept higher scrap prices.

$1 = RMB 6.4655