CHINA STEEL SCRAP: Seasonal lull, production cuts weigh on demand

Demand for both domestic and imported scrap continued to be low in the China market on Friday July 2, market sources told Fastmarkets.

Mills in several provinces were heard being ordered to keep their production level stable year on year for environmental reasons. The fact that Chinese steel markets are in their seasonal period of low demand compounded the lack of interest for raw materials, sources said.
“Demand in the steel markets was subdued by the rainy season. Some mills are planning to go through maintenance because of the low margins,” a Chinese scrap industry analyst told Fastmarkets.
“Margins in mills running electric-arc furnaces (EAFs) were squeezed because the spot prices for rebar were not high enough in a seasonal lull,” a trading source based in Zhejiang province said.
“We heard the electricity prices were up in Zhejiang province, which means it would cost more for the EAFs to operate in the region. Demand for scrap from them would naturally be lower,” the trader added.
A second Chinese trading source said that he expected the low demand to last a while.
"It's a very dull period for steel markets in China now. Scrap prices may go down soon given the big pressure on cutting the annual steel production levels - mills are reducing their scrap consumption," he said.
Large bid-offer gap continues
Buyers have continued to show limited interest in booking fresh cargoes of imported scrap, while offer prices have continued to move up amid strong demand in the Japan and Korean markets, the two largest suppliers of scrap to China in the year to date.
A key Japanese exporter source estimated that the maximum workable price for buyers on Friday would remain at $530-540 per tonne cfr northern China - equivalent to around $520-530 per tonne cfr eastern China – while another trading source believed the acceptable prices for buyers in northern China were lower by $5 at $530-535 per tonne cfr.
"Now with such a wide gap between bids and offers, I am not even trying to market steel scrap to the Chinese mills anymore," a Singaporean scrap trader said.
There were steel mills with no intention to book imported scrap cargoes bidding much lower than the current market level at $500 per tonne cfr northern China, equivalent to around $490 per tonne cfr eastern China.
Offers for heavy scrap (HS) from Japan were heard at $580-595 per tonne cfr China on July 2. Meanwhile, bids from South Korea have hit ¥60,000 ($539) per tonne fob for Japanese HS, with negotiations heard going on with Korea at as high as ¥62,000 per tonne fob for HS.
“The local market in Japan is very strong. I even think the $595 per tonne cfr offer price seems a bit low now for Japanese sellers. The current market situation leaves no possibility for a deal,” the Japanese exporter source said.
Fastmarkets’ daily price assessment for steel scrap, heavy recycled steel materials, cfr China which takes into account prices at ports in eastern China, was $520-530 per tonne on Friday, unchanged day on day.
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Lee Allen

lee.allen@fastmarkets.com

Paul Lim

paul.lim@fastmarkets.com

Tianran Zhao

tianran.zhao@fastmarkets.com

Published

Lee Allen

Paul Lim

Tianran Zhao

July 02, 2021

10:12 GMT

Shanghai, Singapore