MYSTEEL: China's steel scrap prices to see uptrend in Apr

The domestic steel scrap prices have started April on a higher note. As of April 3, Mysteel's steel scrap price index nudged up by Yuan 2.8/tonne ($0.4/t) on week to Yuan 3,194.1/t on delivery and including the 13% VAT, according to the database.

Downstream demand for scrap may keep rising in the near term, as both BF and EAF mills are still producing enthusiastically, Mysteel Global noted.

Despite the weakening sentiment in China's steel market since late March, most domestic steel mills showed no inclination to reduce output, since they could still enjoy some steel margins. This ensured their firm demand for raw materials including steel scrap last month.

Mysteel's latest survey data echoed the trend, with the BF capacity utilization rate among 247 steel mills nationwide touching its 21-month high of 90.56% by end-March, or up by 3.59 percentage points on month. Meanwhile, the EAF capacity use among 87 independent EAF makers across China under Mysteel's tracking also increased by a large 14.94 percentage points on month to reach 68.18% as of March 31, or a new high since May 2022.

Besides, "the price competitiveness of scrap due to its decline against the incline in that of hot metal price last month also prompted most BF mills to increase scrap use in steelmaking to raise their output," a Shanghai-based market watcher observed.

For example, by March 31, the price of 6-8mm common-grade carbon steel scrap in Zhangjiagang city in East China's Jiangsu reached Yuan 2,810/t, while the average cost for producing hot metal in Jiangsu was higher at Yuan 2,935.5/t, both excluding the 13% VAT, Mysteel's data showed.

Though the impurities in scrap will add about Yuan 53/t on the cost of steelmaking, the overall cost of producing steel with scrap was still Yuan 72.5/t cheaper than that with hot metal by end-March, Mysteel Global noted.

As a result, steel scrap utilization among the 130 BF mills Mysteel tracks went up by 1.92 percentage points on month to 14.34% as of March 31. The higher scrap ratio saw total scrap consumption of the 211 steel mills under Mysteel's other survey - including both BF and EAF mills - increase by 28.9% on month to 2.56 million tonnes by end-March.

The room for China's steel scrap prices to incline in April will be limited though, due to a further supply recovery and uncertainties in steel output growth, Mysteel pointed out.

Better weather conditions will also encourage scrap traders to accelerate their outdoor scrap collecting and processing activities, leading to a recovery in domestic steel scrap supply this month.

However, as mills' current steel output has risen to an alarmingly high level, once the steel demand from end-users in 'silver' April – the traditional peak period for steel consumption - turned out to be lower than expected, it will immediately slow the reduction in steel inventories, thus forcing some mills to rein in their production, Mysteel Global understands.

Under such circumstances, lower steel output will reduce these steelmakers' demand for steel scrap. And the possible stretch in China's increasing scrap supply against weakening demand, thus, may put some pressure on the domestic steel scrap prices, Mysteel anticipates.

Written by Lindsey Liu, liulingxian@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com