Scrap prices pick up again in eastern China

Boosted by the increased steel market prices, China's domestic scrap prices registered a considerable rise of RMB 100/mt in the eastern regions over the past week. Meanwhile, following the increase observed in the domestic scrap market, quotations of imported scrap have also moved up.

Over the past week scrap prices in eastern China again moved on an upward trend. At present, mainstream quotations of heavy scrap in Jiangsu Province are up by RMB 100/mt ($15/mt) to the range of RMB 2,600-2,650/mt ($381-388/mt) while the purchase prices of some mills in this province for shredded scrap are at RMB 2,650-2,700/mt ($388-395/mt), up RMB 100/mt ($15/mt) week on week. Meanwhile, market prices of heavy scrap in Shandong Province have also risen, climbing to RMB 2,600-2,650/mt ($381-388/mt), with little change recorded in other regional markets.

With the domestic steel market fluctuating on an upward trend, the Chinese scrap market continued to move up steadily during the past week with an obvious increase of RMB 100/mt or so observed in the market in eastern China. In recent days, the domestic steel market has on the whole been driven up by the steel futures market. For instance, the spot market prices of 12 mm HRB 335 rebar in Shanghai have jumped up by nearly RMB 300/mt compared with the early October levels. The price ascension in the steel market has directly contributed to the rebound in the scrap market.

Moreover, as a result of the growing steel production outputs in China, local market demand for scrap and other raw materials has remained brisk. It was previously thought that under pressure from inventory steel prices would decline during the second half of October, thereby possibly leading to production cuts by the mills. However, stimulated by positive macroeconomic factors, and also influenced by the steel futures market, China's domestic steel market has posted a small recovery and so mills have not cut their outputs. In this context, some mills that had previously lowered their purchase prices for scrap had only limited scrap stocks in hand and became eager to make purchases. At the end of October and start of November, some domestic mills moved to raise their purchase prices, thus providing a certain amount of support for the overall market prices of scrap in China.

In the past week, China's import scrap market has seen a slight rise in quotations. Currently, export quotations of H2 scrap from Japan are up to $295/mt CFR, while import prices of ex-US HMS I/II 80:20 are now at $305/mt CFR.