14 Mar 2014 Last updated at 03:05:05 GMT

BEIJING (Scrap Monster): The scrap purchasing prices by Chinese steelmakers witnessed a huge drop following sharp plunge in iron ore prices. The iron ore spot and future prices declined steadily over the week. Consequently scrap consumers have lowered the buying prices.

The largest scrap consumer in Chinese Jiangsu province-Shagang Group announced a further cut of Yuan 30 per MT on Wednesday. In fact, this is the third round of price cut by the company in less than a week. Shagang Group had cut the scrap purchasing prices by Yuan 20-30 per MT last Saturday and by Yuan 40 per MT on Monday. After adjustments, Shagang’s scrap purchasing prices for heavy scrap now stands at Yuan 2,240 per MT. The company also stated that it may reduce the prices by another Yuan 50 per MT in the coming days.

According to the company, it has not signed any long term contracts for 2014 and is monitoring the price movements in spot and futures of iron ore and steel market to determine the fair price for scrap purchases. However, it is likely to enter into some longer-term supply contracts with selected traders towards end-March.

Meanwhile high inventory levels have forced Yonggang Group-another major consumer of scrap, to temporarily halt scrap purchases.

Industry sources predict further weakness in the scrap market and many more price-cuts to follow.

Author: Paul Ploumis