Scrap is once again becoming an issue as it was round this time last year. A couple of weeks before CNY and lockdown in Wuhan, many EAFs went into care and maintenance due to negative margins. A lack of scrap availability drove prices to unaffordable levels.
As steel prices plummeted, in early Feb due to CNY and covid taking hold in Wuhan, this made scrap even more uneconomical, which led to a higher proportion of steel being produced via blast furnaces.
EAFs operational capacity rates were close to 0% from second half of Jan to March. This was a valid reason for IO prices holding up as well as they did in February. Supply issues from Brazil and Dampier being hit by a cyclone were other major reasons.
Same concerns are now emerging. Scrap prices have hit their highest point in 7.5 years. The first article below explains how profits are being squeezed and availability becoming an issue.
article 2 below explains how China are investing in Japanese scrap yards at present to secure sufficient supply of scrap once import ban is lifted and ferrous scrap can be imported as recycled steel from Jan 2021.
Article 3 is from SMM today explaining scrap availability may become a bigger issue from January 2021 as steel scrap will be more regulated as China no longer want to be the world’s garbage tip ie they don’t want to import waste anymore. Steel scrap will be banned but secondary steel raw materials that meet the new standard can be imported freely without permission of formal consignees or licenses
Scrap is a major competitor of IO. If availability and profitability continue to remain an issue fir scrap, this can only bode well for IO
..............................
Collectors’ high prices weigh on scrap traders’ profits
Source：MysteelDec 09, 2020 16:00See Full-size Table Here
Domestic prices of steel scrap across China might be hovering at a near eight-year but the country’s scrap traders are not celebrating. The profits they’re earning are being squeezed because as winter takes hold across the country’s eastern and northern provinces, scrap collection is becoming more difficult, supply is tightening and collectors are charging more, which the traders reluctantly have to pay so as to meet the domestic steelmakers’ robust demand, market watchers commented Wednesday.
As of December 8, Mysteel’s steel scrap price index had refreshed its multi-year high of Yuan 2,736.3/t ($419.2/t) on delivery and including the 13% VAT, up by Yuan 13.1/t on week or Yuan 147.5/t on year and the highest since April 2013, the data shows. Behind the rise were the steel mills’ firm demand, the strengthening global scrap market, and limited scrap availability locally in winter, Mysteel Global noted.
“Some market participants may assume that we have earned a lot on the current high prices, but that’s not true. In fact, we are mostly under some financial pressure,” a scrap trader in East China’s Jiangsu province told Mysteel Global, explaining that “though steel mills have raised their scrap procurement prices to attract more deliveries, following their adjustment we also had to pay more for securing enough scrap to meet the steelmakers’ requirements.”
Another scrap trader in East China’s Zhejiang province shared the same concern. “The prices we’re offering to our scrap suppliers are even higher than what the steel mills are offering to us. We don’t know how we can make money anymore,” he commented.
At the same time, there are still some scrap traders defending their offering prices, being reluctant to raise their scrap collecting costs any higher. “We are not willing to squeeze our profits too much. Consequently, we are not able to get enough scrap products,” another scrap trader in South China’s Guangdong province said.
On the other hand, demand for scrap among the steelmakers remains firm, as most mills are keen to build up inventories for both their near-term production and for replenishment to tide them through winter. Domestic steel scrap prices are likely to hover high for the time being, Mysteel Global understands.
.............................
EXCLUSIVE: Chinese dealers taking over Japanese scrapyards to secure supply
A number of Chinese dealers and business entities are taking over Japanese scrapyards, or setting up scrap businesses in Japan, to secure sufficient supply of the steelmaking raw material for steel mills in China, market sources told Fastmarkets this week.
“Their main aim is to secure ferrous scrap supply for Chinese buyers when [China’s] import ban is lifted and ferrous scrap is allowed to be imported as recycled steel raw materials in 2021,” a scrapyard source in Japan told Fastmarkets.
These dealers and business entities have sunk considerable capital to become co-owners or full owners of Japanese scrapyards, or have started setting up new businesses in Japan that are related to the sector.
Major Chinese top-tier steelmakers and traders have been actively sounding out various steel scrap supply sources in locations such as Japan and Australia ahead of the lifting of the import ban.
“Many scrapyards and traders are hoarding high-grade scrap such as HS scrap, so that they will be able to send cargoes to China quickly if there is demand,” a Japanese trader told Fastmarkets on Monday November 30.
........................
SHANGHAI, Dec 9 (SMM)— On November 24, the Ministry of Ecology and Environment (MEE), the Ministry of Commerce, the National Development and Reform Commission, and the General Administration of Customs issued an announcement to fully prohibit import of solid waste. MEE stopped accepting and approving applications for import permits for solid waste that can be used as raw materials. The announcement will take effect on January 1, 2021. As steel scrap is also included in the list of solid waste, will the implementation of the new policy affect future steel scrap import?
SMM insight: Items not listed in the Administrative Measures for the Import of Solid Waste will not be prohibited from importing. The reason why China banned solid waste import was because in the past garbage was also imported along with solid waste due to lack of standards for solid waste, and this severely polluted the environment. However, China is now formulating a national standard of Secondary Steel Raw Materials, and when the standard to be officially released at the end of the year, steel scrap and secondary steel raw materials will be two different concepts. Steel scrap will be prohibited from importing from January 1, 2021, while secondary steel raw materials that meet the new standard can be imported freely without permission of formal consignees or licenses
FMG Price at posting:
$21.80 Sentiment: None Disclosure: Held
(20min delay)