Home / Metal News / Steel & Iron Ore / Production curbs to weigh on steel scrap prices
Production curbs to weigh on steel scrap prices
Jun 28,2019 13:30CST
smm insight
Source:SMM
Prices of Changzhou steel scrap averaged 2,456 yuan/mt, tax included, in Jun, up 9.25% year on year

SHANGHAI, Jun 28 (SMM) – Prices of steel scrap across Chinese markets are likely to retreat in the short term as demand will be undermined by deepened production curbs across the top steelmaking hub of Tangshan.

As steel mills ramped up production to chase high profits, prices of steel scrap, a key raw materials for steel production, have firmed since April.

SMM assessments showed that prices of Changzhou steel scrap averaged 2,456 yuan/mt, tax included, in June, up 9.25% from June 2018. The average prices for April and May were 8.87% and 4.03%, respectively, higher than a year ago.    

SMM estimates that Tangshan’s move is expected to affect output of crude steel by 116,600 mt per day, and lower demand for steel scrap by 19,800 mt per day, based on a rate of 17%.

Following intensified anti-smog measures in Tangshan, which is scheduled to last until the end of July, the second-largest steelmaking province, Jiangsu, is also likely to step up its efforts to control pollutant emission as it will hold a meeting about ultra-low emission at steelmakers across the region on Friday June 28.

A supply deficit, however, has supported and will continue to buoy price of steel scrap in the long term.

Post-consumer scrap, a type waste produced by end-consumers such as property, infrastructure, automobile, machinery and home appliance sectors, accounts for 80% of steel scrap supplies in China.

It takes at least 30 years for those steel products to be obsolete and available for recovery, which is longer than the past 20 years or so when China sharply stepped up steel consumption amid rapid urbanization. This means limited supplies of post-consumer steel scrap in China.

The higher recovery rate of waste from the manufacturing process also reduced supplies of steel scrap available to social markets.

Tight supplies are unlikely to catch up with the growing demand in the long term, as the government’s infrastructure push boosts demand for steel.

Supplies of steel scrap will also shrink in the short term, but the decline would be smaller than that in demand, unlikely to deter losses in prices.

A low season across manufacturing has weakened new orders for machinery products, automobiles and home appliances, which will affect steel scrap supplies from the manufacturing process.

Imports will also decline as China will restrict high-grade Category 6 steel scrap from July. Data from China Customs showed that imports of steel scrap came in at 110,000 mt in the first five months of the year, down 85.7% from the same period last year.

Market commentary
Steel
Steel scrap

For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

Related news