MYSTEEL: Chinese ferrous scrap prices to firm in Feb
The country's scrap prices strengthened significantly early last month when steelmakers were actively buying scrap to build their inventories of feed materials, as Mysteel Global reported, but prices soon headed downward as steel mills completed their winter stocking and reined in production.
China's national steel scrap price index under Mysteel's assessment hit an eight-month high of Yuan 3,089.3/tonne ($430.7/t) including the 13% VAT on January 5, after which the price steadily retreated to settle at Yuan 3,043.2/t by the end of last month.
Entering this month, steel scrap transactions in the market have declined significantly as the holiday looms, with scrapyards, traders, and electric-arc-furnace (EAF) makers all preparing to kick off their holidays early, a market analyst based in Shanghai observed.
For example, as of February 4, the total volume of steel scrap arriving at the 300 blast furnace (BF) and EAF mills under Myteel's tracking was 438,224 tonnes, lower by a large 25.2% on month. Sunday was a working day in much of China before the eight-day CNY holiday, Mysteel Global notes.
By the same day, total steel scrap inventories held by these sampled 300 mills had reached 7.2 million tonnes, which would be sufficient to last them for 11.8 days at their present use rates, 1.6 days longer than in early January, according to Mysteel's assessment.
"The (BF) mills have secured sufficient scrap materials to maintain normal operations during the official holiday, while EAF mills have gradually turned off their furnaces," the Shanghai analyst noted.
As of the end of January, capacity utilization among the 87 independent EAF steel mills nationwide had dropped to 35.01%, lower by a significant 27.9 percentage points on month, and these mills' production continues to decrease, according to Mysteel's tracking.
As the market quietens, minimal fluctuations in steel scrap prices are likely during early and mid-February, the analyst predicted.
Nevertheless, the BF mills are expected to conduct intensive purchases of steel scrap when trading resumes in late February, since they will need to replenish the feed materials they consumed during the CNY break.
"Steelmakers' restocking demand will drive up steel scrap prices, though the scope of price increases may be small," the analyst said. "Most mills hold a bearish outlook for the post-holiday prices of finished steel products, so they will not accept large rises in steelmaking raw materials," he explained.
On the other hand, China's steel scrap availability may remain tight in February since domestic scrap suppliers continue to keep their inventories low to avoid financial risks, which will also lend some support to scrap prices, Mysteel Global noted.
As of February 2, total steel scrap inventories held by the 584 scrap yards qualified by China's Ministry of Industry and Information Technology stood at 1.02 million tonnes, lower by 3.19% on month, according to Mysteel's tracking.
Written by Anthea Shi, shihui@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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