Shagang cuts steel scrap purchase prices by $7/t

With the latest adjustment, Shagang is paying scrap dealers Yuan 2,950-3,010/t for domestically processed HMS grade scrap, including delivery to its plants and the 13% VAT, according to its announcement.

The slack recovery of China's steel demand has caused domestic steel prices to lose ground overall, while steel scrap prices stand largely stable due to its tight availability in the market, Mysteel's survey showed.

As such, many EAF steelmakers across the country have seen their steel profit margins turn negative of late, with the average loss on the sales of construction steel products incurred by the 36 independent EAF mills Mysteel tracks reaching Yuan 73/t as of March 6. "The mini-mills are eager to shave their production costs by cutting scrap purchase prices," a market watcher based in Shanghai said.

Shagang's latest move led scrap prices in Jiangsu's Zhangjiagang city to weaken quickly. By Wednesday evening, the spot price of 6-8 mm carbon steel scrap in the city had lost Yuan 50/t from the prior day to reach Yuan 2,580/t excluding the 13% VAT, according to Mysteel's assessment.

Across the country, around a hundred steelmakers decided to follow suit and curtail their steel scrap buying prices by Yuan 10-120/t on the same day, according to Mysteel's tracking.

The wide-ranging price drops triggered panic among Chinese steel scrap suppliers, forcing them to speed up their scrap deliveries, Mysteel Global learned. On Wednesday, Shagang saw the scrap arrivals at its plants in Zhangjiagang reach 19,808 tonnes, higher by 4.2% from the previous day, Mysteel's other survey showed.

"Scrap dealers may keep ramping up their sales for fear that the prices will slide further, so the scrap arrivals among steelmakers will likely continue growing in the following days," the Shanghai market watcher maintained.

Written by Anthea Shi, shihui@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com