Shagang raises scrap procurement price by $14
The rise is Shagang’s largest so far this year, Mysteel Global notes, and with the latest adjustment, the company is now paying Yuan 2,860-2,910/t for domestically sourced HMS grade scrap in terms of delivery to its mill and including the 13% VAT.
“Scrap supply remained tight during the holiday (so) we’ve had no choice but to consume our stocks to maintain normal production,” complained a Shagang official. Most Chinese steelmakers maintained normal production during the National Day break over October 1-7 while scrap collectors and traders enjoyed the holidays, Mysteel notes. Thus, Shagang raised its scrap buying prices to encourage scrap suppliers to speed up deliveries to its plant.
As of October 7, scrap deliveries to Shagang’s Zhangjiagang steelworks had nearly halved from the September 30 level to just 5,369 tonnes, Mysteel understands.
Meanwhile, total stocks at the 61 domestic steel mills nationwide comprising both blast furnace and EAF producers which Mysteel monitors decreased by nearly 10% or 257,200 tonnes on week to 2.35 million tonnes to hit a two-year low as of October 8. This was sufficient to last these mills for 11.2 days at their present daily consumption rate, or 1.3 days shorter than the previous week.
Limits on the use of trucks amid celebrations to mark the 70th anniversary of the People’s Republic at the start of the holidays created more difficulties for scrap deliveries, tightening supply further, Mysteel notes.
Another contributor to the tightness, though, is Shandong Iron & Steel Group, a major state-owned steelmaker in East China’s Shandong province. In August, Shandong Steel celebrated the formal completion of first-stage construction of its new integrated mill in Rizhao in Shandong province which boasts a crude steel capacity of 8.5 million tonnes/year. Industry watchers say that with the commissioning of the Rizhao works, large quantities of scrap have been diverted from Jiangsu province and delivered to Rizhao city.
“I think Tuesday’s announcement was Shagang’s inaugural price push and from here on, it will continue to raise its buying prices further,” said a Jiangxi-based scrap trader. Shagang last raised buying prices exactly a month ago on September 9, Mysteel notes.
“We will not rush to deliver more scrap to steel plants but will sell based on the previously contracted volume,” the Jiangxi trader added. “The traffic controls also had an impact on scrap collecting, so we are now focusing on collecting more scrap materials,” he commented.
Shagang’s scrap price movement is always carefully watched by the local scrap market, and shortly after the mill’s announcement, the price of 6-8mm common-grade carbon steel scrap at Zhangjiagang jumped by Yuan 50/t to hit a two-month high of Yuan 2,490/t excluding the 13% VAT, according to Mysteel’s survey. Moreover, another 22 steelmakers nationwide also followed Shagang’s lead and lifted their scrap buying prices by between Yuan 30/t and Yuan 80/t.
Written by Lindsey Liu, liulingxian@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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