CHINA STEEL SCRAP: Possible price peak, futures plunge keep buyers away - sources

Plunging steel futures and physical prices in China kept buyers away from the import markets on Friday March 5, industry sources told Fastmarkets.

Overnight price falls in rebar, hot-rolled coil and iron ore futures have dampened buying interest, with bids at $500-502 per tonne cfr China for imports of HRS101-grade heavy scrap (HS).

Offers from sellers were at $510 per tonne cfr China. Key market participants estimated that prices were at $505-510 per tonne cfr China.

“Any offers above $510 per tonne cfr China are unworkable and unlikely to be taken up by Chinese steel mills because domestic prices are falling,” a trader source in Singapore said.

This is especially the case after rebar prices in east China fell by 80-90 yuan ($12.36-13.91) per tonne on Friday to 4,640-4,670 yuan per tonne. Although major mills in Jiangsu kept their domestic scrap purchase prices at 3,350-3,390 yuan, a few smaller mills cut their buy prices by 20-30 yuan per tonne on Friday, Fastmarkets heard.

Previous transactions at $510-515 per tonne cfr China by Chinese traders were no longer representative of the spot market, sources said.

Fastmarkets’ price assessment for steel scrap, heavy recycled steel materials, cfr China was $505-510 per tonne on Friday, down by $5 per tonne from $510-515 per tonne cfr the previous day.

The 180,000 tonnes of Japanese scrap offered to a major South Korean buyer on Wednesday also sent jitters through buyers, who were spooked by the excess supply. This was especially so because the buyer purchased just 60,000 tonnes of high-grade Shindachi and HS scrap at ¥48,500 ($454) and ¥47,500 per tonne fob Japan, respectively.

A subsequent bid for Japanese H2 scrap from another South Korean steelmaker was heard at ¥43,000 per tonne fob on Friday. Significantly, this bid price was ¥500 per tonne below the bid given by the first steelmaker for the same grade.

“Sellers are looking to cash in and profit now, which is why there is some sentiment that prices have possibly peaked in the short term,” the trader source said.

“It feels like the market is about to peak - or perhaps we are already standing on the peak now,” a Japanese scrap supplier source said.

Uncertainty over industrial regulations stemming from the “twin sessions” in Beijing, the annual meetings of China’s top legislative and political advisory bodies, has also caused wavering sentiment.

Market sources expect a flurry of announcements following the conclusion of the meetings, including a tightening of monetary supply to reduce quantitative easing and prevent overheated financial markets.

Join Fastmarkets and steel industry experts on Wednesday March 10 for a special webinar on the revival of the Chinese steel scrap import market: Understanding China’s steel scrap market dynamics. You can sign up here.

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