Other Elements and Materials

Chinese Ferrous Scrap Prices Likely to Remain Strong Amid Restocking

Chinese Ferrous Scrap Prices Likely to Remain Strong Amid Restocking
Mining News Pro - 30 steelmakers have increased their purchase price of steel scrap by RMB 20-70/MT (USD 3-10)
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According to Mining News Pro - China’s scrap prices are on upward track - According to reports, On September 19, among the 245 key steel mills in China, 30 steelmakers have increased their purchase price of steel scrap by RMB 20-70/MT (USD 3-10) however, 3 of them reduced the price marginally. Those steel mills that increased prices are mainly located in provinces like Hebei, Shanxi, Yunnan and South China etc while those who reduced prices are a far from each other. At present, there is inadequate spot stock of scrap in the market and thus price of scrap tends to go up and market mentality is confident due to the need to stock up by steel mills before Mid-autumn festival and national holidays.

Molten iron and steel scrap cost comparison – In order to fetch profit in smelting, considering the cost and loss of steel scrap, the cost of molten iron usually should be higher than the scrap price by RMB 100-150/MT. If the price difference between molten iron and scrap is above this value, scrap is more cost effective; below this value, molten iron is more cost-effective.

Sample

Molten iron cost (RMB/MT ,excl. tax)

Steel scrap price (RMB/MT,excl. tax)

(Molten iron - steel scrap) in RMB/MT

Theoretical model

2137

2374

-237

Price margin between rebar and scrap hits record high - As it can be seen from the above table, the current price difference between molten iron and scrap is noted around RMB -237/MT, indicating less cost is in molten iron route. The price gap between rebar and scrap today in China is around RMB 1960/MT (USD 286) (considering Shanghai HRB400 rebar at RMB 4640/MT and Shagang steel HMS 2 scrap at RMB 2680/MT as samples), an increase of RMB 30/MT as compared with the same yesterday (D-o-D). The difference of rebar and scrap hits the record high this year.

Chinese steel mills continue fetching record high profits –

Types

Rebar cost (RMB/MT)

Rebar price (RMB/MT)

Gross profit (RMB/MT)

Blast furnace-converter

3300

4600

+1300

Electric arc furnace

4033

4600

+567

Steel scrap inventories at various key steel mills are rising sharply - On September 18, as per 109 sample steel mills in the country, scrap inventories recorded at a total of 274,500 MT, an increase of 3010 MT, up 1.11% M-o-M. Also number of contracts in hand for scrap are decent at present.

Scrap market is prone to turn bullish in the short term – As per outlook on the market, steel mills are likely to stock up scrap before upcoming festivals, on the other hand, price margin between the rebar and scrap has already hit the record high now, making profits of steel mills to reach new level this year. Thus, the scrap price will increase once arrival of scrap at steel mills is reduced in upcoming days in China.

 

 


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