Shagang raises scrap buying prices to attract deliveries

After the latest adjustment, Shagang is paying scrap dealers who send their materials in trucks Yuan 2,790-2,850/t for domestically processed HMS grade scrap, including the delivery to plants and the 13% VAT, according to the announcement.

The company's decision to raise prices aims to prompt scrap suppliers to accelerate sales and deliveries, so that it could have sufficient feed stocks to meet its immediate production needs, Mysteel Global learned.

As midsummer brings hotter and more humid weather across China, domestic scrapyards find it increasingly challenging to collect and process ferrous scrap materials in the daytime, market sources observed.

Consequently, Shagang has observed a rapid decline in scrap deliveries to its steelworks. For example, the volume of steel scrap arriving at the company's Zhangjiagang plants in Jiangsu was 9,530 tonnes/day on July 5, lower by a marked 34.9% on week, according to Mysteel's survey.

By the same day, the total steel scrap inventories held by these plants also dropped 3% on week to near a 10-month low of 211,429 tonnes, the parallel survey showed.

Shagang's price hike effectively stimulated sales among scrap suppliers, leading to more scrap deliveries to its plants over the past weekend, market sources observed.

Shagang's move also buoyed spot prices for steel scarp in Jiangsu, with the transaction price for 6-8mm carbon steel scrap in Zhangjiagang rising Yuan 20/t from Friday to reach Yuan 2,500/t excluding the 13% VAT by late Monday morning, Mysteel assessed.

However, many steelmakers across China still opted to reduce their scrap buying prices to alleviate production costs, as they were still suffering hefty losses on their operations, Mysteel's other survey showed.

Over the weekend, a total of 56 Chinese steel mills announced Yuan 10-50/t cuts in their ferrous scrap purchase prices, Mysteel Global learned.

Written by Anthea Shi, shihui@mysteel.com

Edited by Alyssa Ren, rentingting@mysteel.com