Considering the cost of steel scrap smelting, losses, and other factors, if the price difference between steel scrap and pig iron is higher than 100-150 yuan/mt, the cost advantage of steel scrap is greater; if it is lower than the level, the cost advantage of pig iron is greater. As of May 31, the price difference between pig iron and steel scrap was 168.7 yuan/mt, lower than the average price difference of 210 yuan/mt in 2023, and at the mid-level of the range (19-428 yuan/mt) of the price difference between pig iron and steel scrap in 2023. The price difference between pig iron and steel scrap narrowed by 44 yuan/mt MoM. In May, the price difference between pig iron and steel scrap expanded and then narrowed. In the first half of the month, production resumptions of steel mills drove up the prices of iron ore and coking coal. In the second half of the month, rumours of production restrictions and the slowdown in steel destocking led to a rapid drop in the cost of pig iron. During this process, the fundamentals of steel scrap remained relatively stable, with limited fluctuations in prices. Regarding the price difference between rebar and steel scrap, in May, rebar prices fluctuated more than steel scrap, leading to an expansion and then narrowing of the price difference between rebar and steel scrap.

Looking ahead, considering the limited supply-demand imbalance in the steel scrap market, price fluctuations are expected to remain lower than those of pig iron and rebar. In June, the price difference between steel scrap and pig iron and that between steel scrap and rebar is expected to fluctuate at low levels.