China's scrap market experienced a slight rebound last week, defying the overall weakness in the steel sector. According to Kallanish's assessment, the price of 6mm+ heavy scrap delivered to mills in eastern China's Yangtze River Delta remained stable at CNY 2,729/tonne ($376/t) including VAT on Friday, marking a CNY 12/t increase from the previous week.
The uptick in scrap prices comes amid challenging conditions in the broader steel market. Data from information provider Fubao reveals that 49 independent electric arc furnace mills in China reported a 52.3% operating rate, indicating subdued production levels. This suggests that the scrap price increase is not driven by heightened steel production demand.
Industry analysts attribute the scrap market's resilience to tightening supply rather than increased demand from steel mills. The recent decline in scrap availability, possibly due to seasonal factors or reduced collection activities, has supported prices despite the weak performance of the steel sector.
The divergence between scrap and steel markets highlights the complex dynamics at play in China's metallurgical industry. While steel mills are grappling with low demand and reduced production rates, the scrap market is showing signs of supply-side constraints that are propping up prices.
This situation presents a challenging environment for steel producers, who may face pressure on their margins if scrap prices continue to rise while steel prices remain depressed. The industry will be closely monitoring whether this trend persists and how it might impact steel production costs and strategies in the coming weeks.
