Shagang, headquartered in Zhangjiagang city in East China’s Jiangsu province, has so far reduced its scrap procurement prices by a total of Yuan 220-230/t in April, after a similar degree of price cut for March, Mysteel Global noted, and with the latest adjustment, Shagang is paying Yuan 2,330/t for domestically-sourced HMS 80:20 scrap in terms of delivery to mill and including the 13% VAT.
“Shagang’s almost daily scrap price cuts have frightened the domestic scrap market more,” a Shanghai-based market source commented, as this has only suggested that China’s steel consumption may not be recovering as much as expected, and Chinese steel mills’ earlier hope for better demand in April and May, the traditional peak season, may have been dashed, Mysteel Global understood from the market.
Shagang’s latest scrap price cut immediately dragged down the local scrap price, with that of the 6-8mm common-grade carbon steel scrap having dipped to its nearly 22-month low of Yuan 2,050/t excluding the 13% VAT as of April 7, or down Yuan 80/t from last Friday.
Another 38 steelmakers across China immediately followed Shagang’s move by lowering their scrap buying prices by a range of Yuan 20-100/t accordingly, Mysteel understood.
“Honestly, I don’t understand the scrap market anymore, and I do not know whether I should sell off more or hold onto the stocks until the market bottoms out, if it happens at all,” a Jiangsu-based scrap trader confessed.
“The successive price cuts have dampened our sentiment, and the fast spread of the virus in the world deepened the bearishness in the global steel market, which in turn has also imposed pressure on China’s steel market and scrap prices,” he added.
Other than the market sentiment, China’s steel scrap market fundamentals have been of little consolation either, as the capacity utilization rate of the 53 independent EAF producers across China still stayed low at 47.14% as against the 65% by the end of 2019 despite the gradual resumption and ramp-up since March 19, or a 6.8 percentage points week-on-week incline over March 27- April 2, as steel margins for the EAF mills are meagre or even negative.
