SMM analysis: Strong demand for steel scrap in October leaves room for price increases

In September, domestic steel scrap prices hit bottom and rebounded. As of September 30, steel scrap prices in Zhangjiagang were 2,220 yuan/mt, up 50 yuan/mt from the end of August. Turkey is a major source of China's steel scrap imports. Historically, Turkish steel scrap prices have been lower than domestic prices. As of September 30, Turkish steel scrap prices were $373/mt, equivalent to 2,613 yuan/mt, 123 yuan/mt higher than Shagang Group's steel scrap purchase price. Due to the sharp drop in domestic steel scrap prices, Turkish steel scrap temporarily exceeded domestic prices.

In September, steel scrap prices opened low and rose high, mainly because ferrous metals series prices fell to the lowest level of the year in the first half of the month. Electric furnace steel mills were on the verge of shutdown, and BF maintenance began, causing steel scrap demand to plummet and prices to be forced down. Starting mid-month, steel production cuts improved fundamentals, and steel prices rebounded, with EAF profits breaking through first, leading to gradual resumption of production. In late September, macro policies ignited the market, and ferrous metals series prices rose across the board, with steel scrap prices following suit. Looking ahead, currently, steel mills are generally profitable, production enthusiasm is rising, the ratio of scrap added into BFs is increasing, EAF production is rapidly expanding, and steel scrap consumption is rising quickly. It is expected that steel scrap prices will still have some room to rise in October.