CHINA SCRAP: Price surge chips away EAF mills’ profit

China’s ferrous scrap prices moved up sharply over the past week due to tight supply, eating into the profits of mills that operate electric-arc furnaces.

Fastmarkets’ price assessment for steel scrap heavy scrap domestic, delivered mill China was 2,480-2,560 yuan ($350-361) per tonne including value-added tax on Friday May 8, up by 70-150 yuan per tonne from 2,330-2,490 yuan last Thursday.

Sources attributed the increases to sustained restocking of the steelmaking raw material among mills amid tight supply, similar to previous weeks.

But the difference this past week is that some EAF operators were either no longer making money incurring losses due to the higher scrap prices, an industry analyst in northern China said.

Ferrous scrap prices are now 200-280 yuan per tonne higher than mid-April’s year-to-date low of 2,200-2,360 yuan per tonne.

“Profits were around 300 yuan per tonne for EAF mills in mid-April,” the analyst said.

Market sources told Fastmarkets that a few mills have shut down their EAFs this week.

“Demand from EAFs may drop slightly, but demand from mills running blast furnaces and converters will remain strong due to the good downstream market,” a trader in eastern China said.

For instance, Fastmarkets’ price assessment for steel reinforcing bar (rebar) domestic, ex-whs Eastern China was 3,500-3,540 yuan per tonne on Friday, up by 90-100 yuan per tonne from 3,410-3,440 yuan per tonne on April 30.

Market participants expect ferrous scrap prices to remain high level next week unless more EAFs suspend production.

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