China’s stainless mills use more scrap to boost profits
ABSTRACTChinese stainless steel producers are preferring to use more stainless scrap in their production these days to reduce their consumption of nickel pig iron (NPI) where prices have been hovering at a high level, Mysteel Global learned.
“Domestic steel mills still can enjoy some profit margin when they produce with a higher ratio of stainless scrap, though the profitability has narrowed compared with one month ago,” a market source in Shanghai said.
As of October 28, Mysteel assessed the mills’ average margin when making 304-grade coil-rolled coil (CRC) incorporating a higher percentage of stainless scrap at 2.7%, down 1.9 percentage points on month. On the other hand, making 304-grade CRC using the high-grade NPI resulted in mills posting a 2.1%-2.9% loss, according to Mysteel’s survey. The loss when using low-grade NPI and nickel metal to produce 304-grade CRC was 7% on the same day.
The chance to improve their profit margins has persuaded Chinese stainless steelmakers to use more scrap for their stainless production, with the result that their consumption for stainless scrap has grown significantly, Mysteel Global noted.
Mysteel’s other survey among the 19 stainless producers showed that their consumption of 300-series stainless scrap in September grew for the fourth successive month by another 14.3% on month to 249,100 tonnes, in sharp contrast to the 128,400 tonnes they consumed back in May.
The Chinese stainless mills' renewed preference for scrap also springs from the high domestic NPI prices. After the National Day holiday earlier this month, many stainless producers were not active in replenishing their NPI stocks, though their inventories at hand cannot meet their needs for November production, Mysteel Global noted.
The domestic NPI price has been trending upward since mid-July on support of the firm price of nickel concentrates. As of October 28, the price of 8-15% grade NPI in East China’s Jiangsu province was at a one-year high of Yuan 1,210/mtu ($180/mtu) including delivery and 13% VAT, up by Yuan 30/mtu from one month earlier, according to Mysteel’s data.
However, despite of the attractive profit margins available, not all the stainless producers are free to increase their usage for scrap, given the different stainless production facilities mills employ. “NPI still dominates as the raw material of choice in stainless production in China, and some stainless mills have had to produce based on NPI, despite of higher costs involved,” the Shanghai-based market source explained.
Written by Nancy Zheng, firstname.lastname@example.org
Edited by Russ McCulloch, email@example.com
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