Shagang cuts another $7 per tonne off steel scrap procurement price

Shagang Group, China's largest privately-owned steel producer in Jiangsu province, East China, has announced a 50 yuan ($7) per tonne cut to its scrap procurement prices due to lower steel scrap consumption by domestic steel mills amid thin profits or even losses, market sources said

Shagang’s price policy of steel scrap is widely viewed as the weathervane of the country’s scrap market movement; Shagang is a leading electric-arc-furnace (EAF) producer in China, while it also hosts huge blast furnace (BF) capacity. The steelmaker has reduced its scrap procurement price by a total of 520 yuan per tonne since June 14 and it is paying 3,300-3,360 yuan per tonne for domestically-sourced heavy scrap as of July 6.

“Steel scrap buying [of Chinese steelmakers] has been thin so far this week and there is no sign of recovery, which is probably due to low profitability,” a steel trader based in East China said.

Chinese steel mills’ scrap consumption is at a multi-year low, a Shanghai-based scrap analyst said at a recent industrial event.

The utilization rate of steel scrap in steelmaking in China was only 17.98% at the end of June, down by 1.28% from a week ago and down by 6.08% from a year-to-date peak in March, according to the analyst.

“Some steel mills have kept their scrap utilization to only 1-2%. They just use the scrap generated by themselves, but don’t buy any extra from the market,” the analyst said.

A few steel producers in North China told Fastmarkets that they have stopped scrap procurement in recent weeks.

“The problem for Chinese steel mills now is how to deplete high finished steel stocks and how to lower production costs so they have no need to increase production. BF makers [aim to] have no need to even use scrap,” an official from a mill said.

More BF mills have recently announced maintenance plans due to poor finished steel demand, high finished steel stocks and low profitability. The capacity utilization rate of Chinese EAF makers declined to 35.59% at the end of June, according to the Shanghai analyst.

What to read next
A bullish consensus formed last week in Shanghai as leading market participants met for the annual CPICC conference and Shanghai Pulp Week. Meetings were held against the backdrop of growing concerns around market pulp and woodchip supply, while questions remained around the strength of underlying demand. Heading into the week, the rally in pulp prices […]
This initiative marks a significant step towards reducing industrial greenhouse gas emissions and championing the US in the global decarbonization effort
The March 2024 monthly averages were published today based on the index values of March 1, 8, 15 and 22.
Fastmarkets has corrected its MB-STE-0034 steel domestic plate 8-40mm, exw Northern Europe and MB-STE-0035 Steel domestic plate 8-40mm, exw Southern Europe assessments, which were published incorrectly on Wednesday March 27.
Recent developments in China’s pulp and paper industry, notably the divestment of the Anhui Huatai pulp mill, prompted a closer examination of the dynamics of swing pulp lines, particularly the delicate balance between dissolving wood pulp and paper grade wood pulp. The Anhui Huatai pulp mill, which suspended production in the first half of 2023, […]
The green steel supply chain is gradually starting up in Malaysia, largely due to stricter decarbonization-related government policies, sources said in the week to Monday March 25. One of these policies is a two-year moratorium on all expansion and diversification of manufacturing activities in the iron and steel industry