Steel scrap prices plummeted in March and may remain volatile in April

Domestic steel scrap prices plummeted in March. As of March 29, the steel scrap prices in Zhangjiagang were 2,500 yuan/mt, down 150 yuan/mt MoM. Turkey is the main source of China's steel scrap imports. Historical data showed that Turkish steel scrap prices were chronically lower than the domestic prices. The Turkish steel scrap prices were $400/mt as of March 29, equivalent to 2,838 yuan/mt, 58 yuan/mt higher than purchase prices of Shagang Group. The price spread between the two eroded by 204 yuan/mt MoM. Turkish steel scrap prices were slightly higher than domestic ones at the end of February. A reason behind the sharp decline in steel scrap prices in Turkey and China was muted demand.

In March, domestic steel scrap price rout was mainly due to little positive impact of macro policies from the Two Sessions. In terms of industry, real estate and infrastructure investment and funding conditions will deteriorate further in 2024. Weaker-than-expected demand led steep prices to nosedive first. Therefore, deep losses tipped steel mills to largely slash production to relief inventory losses and sales pressure, which significantly tamed steel scrap, iron ore and coal prices in March. In late March, low ferrous metal prices and low production shifted finished steel stocks into a downward spiral. Steel and steel scrap prices stood low. Looking forward, given restart of steel mills, destocking of finished steel and moderate export market, steel and steel scrap prices may remain volatile. In the mid-to-long term, after climbing output, steel and steel scrap prices will be dominated by picture of steel inventory depletion. If sluggish demand leads to piling-up of finished steel stocks again, steel and steel scrap prices may decline again.