Output cuts mute scrap imports in China, local prices up slightly

Following the production cuts declared by China’s government for the second half of the year and, consequently, the expected decrease in consumption of raw materials, the import buying activity of Chinese scrap customers has been muted further. However, the rising trends in the futures and physical steel markets that have prevailed in China since the beginning of the current week have encouraged local scrap suppliers to increase their prices slightly.

The import scrap market in China has remained quiet due to the divergence between offers and bids, in particular. Accordingly, while most ex-Japan scrap offers have been voiced at around $560-570/mt CFR, bids for HS scrap from Chinese customers are hardly at $520/mt CFR. “China’s ongoing rally is due to speculation on back of the production cuts. Semis and finished steel prices will go up, but not raw materials’,” a key China-based trader commented with regard to the current developments.

Meanwhile, average domestic HMS scrap prices in China are at RMB 3,631/mt ($561/mt) ex-warehouse, increasing by RMB 21/mt compared to June 29, according to SteelOrbis’ information. In the coming week, it is expected that scrap prices may fluctuate within a limited range.

During the given week, there were fewer domestic scrap supplies arriving in the spot market, and the average daily consumption of scrap also decreased due to the 100th anniversary of the founding of the Communist Party of China, and so steelmakers raised their local purchase prices for scrap. The increasing rebar futures prices signaled improved sentiments among market players. However, the expected production restrictions weakened the support for raw material prices.

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

$1 = RMB 6.4762