Steel scrap prices to rise in November amid positive market outlook

Domestic steel scrap prices fell before rising in October. As of October 31, steel scrap prices in Zhangjiagang stood at 2,550 yuan/mt, down 50 yuan/mt MoM.

Ferrous metal prices fell first and then hike in October. In H1 October, demand weakness was reported amid fallout of the National Day holiday and the Asian Games. In addition, expected overseas interest rate hikes and local conflicts led to rising risk aversion. A shares also fell below 3,000 points again in mid-October. Meanwhile, post-holiday steel demand failed to improve. Under this circumstance, steel prices shifted steel mills towards production cuts, and steel scrap prices also dropped. In mid-October, with waning impact of bearish ferrous metal market sentiment, the most-traded rebar futures contract stopped falling and stabilised at 3,550 yuan/mt. In addition, favourable policies were once again introduced in China. The central government will issue an additional 1 trillion yuan of 2023 government bonds in Q4 2023. The early release of local debt limits is expected to be extended for another five years. China will promote a new round of "housing reform" and other positive policies. Ferrous metal prices rebounded. Domestic construction and manufacturing industries were in a peak season in October, leading to steel scrap supply overhang, while steel scrap demand appeared stable-to-weak as steel price erosions tipped steel mills into production cuts in mid-to-early October. Under this circumstance, a rally in steel scrap prices was much weaker than that of other varieties in late October. In the future, as good profits fuelled EF steel mills’ enthusiasm for production, more players were upbeat about outlook for steel scrap market. Steel scrap prices may make gains in November.