Scrap shortage to pressure steel supply in Sep despite uncertainty around Tangshan cutbacks

SHANGHAI, Aug 29 (SMM) – Steel production is expected to continue declines in September as tight supply of steel scrap will likely force some electric arc furnace (EAF) steelmakers that use scrap as feedstock to suspend for up to 10 days, an SMM survey found on Wednesday August 28. 

This followed after potential looser output restrictions in China’s top steelmaking hub of Tangshan, which sparked market concerns about higher supply and weighed on both futures and spot prices of ferrous products from Monday. 

There remained uncertainties around the September cutbacks in Tangshan, as market rumoured on Wednesday about a tougher version that featured a 50% cut during September 1-28 and a full suspension on September 29-30. 

SMM expects a significant increase in demand for steel scrap in the fourth quarter as a slew of steel new capacity will ramp up to full production. This, together with the already tightness of scrap supply, drove scrap traders to hold cargo back from the market. 

Steel mills in north-west, south-west, and east China have reported less availability of steel scrap in the spot markets, SMM learned on Wednesday. 

Some steelmakers have cut production by lowering the proportion of scrap used in feedstock due to the growing prices of scrap materials and the recent declines in iron ore prices.