China scrap steel prices may rise in November

Scrap steel prices in the country fell significantly in October as steel producers lowered scrap procurement prices to reduce production costs, Mysteel Global said.

As of October 31, China's Mysteel scrap steel index was 2,892.7 yuan per ton ($406.4 per ton), including 13% VAT, down 2.9% from the end of September. This month, the price index began to recover and by November 3 rose to 2899.7 yuan per ton.

“Domestic blast furnace steel (BS) producers have generally struggled with negative margins over the past month, and to cut losses, many mills have decided to cut production by reducing the proportion of scrap in feedstock later this month,” the analyst added.

Between October 2 and October 27, weekly scrap steel consumption among 221 domestic blast furnace and electric arc furnace (EAF) steel producers averaged 2.6 million tonnes per week, according to Mysteel's regular survey, down 2.8% from with the weekly average for the period from September 4 to October 27. 29.

“The decline in scrap prices, as well as a decrease in scrap consumption by metallurgists, forced domestic scrap metal processing companies to accelerate sales,” the analyst noted. “They had to reduce their own scrap metal inventories to avoid financial risks,” he explained.

According to the country's Ministry of Industry and Information Technology, as of October 25, total scrap steel inventories at 584 Chinese steel mills certified by the country's Ministry of Industry and Information Technology fell to 1.03 million tons, down 4.7 percent year-on-year. month, and updated the lowest level since October last year. to track Mysteel.

However, demand for scrap steel in China is expected to increase this month as domestic EAF steel producers become more active in production after their profitability has steadily recovered, Mysteel Global said.

On November 3, the average construction steel sales loss incurred by the 40 independent electric steel mills tracked daily by Mysteel fell to 55 yuan per ton, significantly lower than the average loss of 121 yuan per ton they incurred on October 7. .

Under such circumstances, for the period from October 27 to November 2, the capacity utilization rate of 87 Chinese EAF plants averaged 53.05%, according to Mysteel's weekly survey, an increase of 4.79% month-on-month.

"Finished steel product pricing currently outperforms scrap steel and this is likely to encourage electric furnace plants to continue ramping up production this month to secure their profits," the analyst said.

Meanwhile, with prices of iron ore - the dominant material for steel production in China - still hovering at high levels, prices of finished steel products are expected to continue strengthening thanks to support from ore prices, he added. However, price increases will be limited as actual demand for steel remains unchanged, he warned.

“Domestic steel scrap prices could also rise to a limited overall range in November as they typically follow a similar pattern to finished steel prices,” he forecasts.