Chinese steel mills to stock less scrap before Chinese New Year amid losses, sources say
Fewer Chinese steel mills are planning to stock up on steel scrap before Chinese New Year, and those that do will be doing so at lower volumes than in previous years, market sources told Fastmarkets this week
The reason for this, sources added, is that mills are suffering from losses and steel scrap supply in the domestic market remains tight.
Blast furnace-based steel mills usually stock up on raw materials, such as steel scrap, before the Chinese New Year in order to maintain production over the holiday period, since scrapyards and trading houses close earlier than the official holiday period and transportation tends to slow, Fastmarkets heard.
Chinese New Year, also known as Lunar New Year, takes place on January 21-27 next year.
“This winter steel mills may only stock scrap for usage for around 16-17 days instead of the usual 20 days, and the main reason for that is they are suffering from losses,” a Shanghai-based steel scrap analyst told Fastmarkets.
“The mild rises in steel prices recently have all been eaten up by quickly-rising steel scrap prices,” the analyst added.
Fastmarkets’ weekly assessment of steel scrap heavy scrap domestic, delivered mill China was 2,910-3,100 yuan ($417-445) per tonne on December 9, up by 140-220 yuan per tonne from 2,690-2,960 yuan per tonne on November 11.
In comparison, Fastmarkets’ assessment of steel reinforcing bar (rebar) domestic, ex-whs Eastern China only increased by 80-90 yuan per tonne over the same period to 3,770-3,800 yuan per tonne on December 9.
“Steel scrap supply is tight this year and scrap prices are high, which also limited steel producers’ buying interest,” an eastern China-based scrap trader said.
Despite this, China’s steel scrap prices are likely to remain supported in the run-up to Chinese New Year, market sources said.
“Steel scrap prices will be kept at a high level before Chinese New Year. Supply is tight and mills’ scrap inventories remain low, so it will take mills longer to fully restock, and they will need to pay higher prices for the products even though their targeted volumes are lower than that in previous years,” a second eastern China-based trader told Fastmarkets.