Chinese steelmakers have cut purchase prices for ferrous scrap by almost 6% in the past two weeks due to falling prices for finished steel. The factories began to purchase less scrap metal in anticipation of the planned production cuts in the fall and winter.
On average, purchase prices for scrap metal in China have decreased from the beginning of the week by $ 20 to $ 380 per tonne.
The high supply of scrap at the mills and the decline in steel prices since the beginning of September prompted the mills to reduce purchase prices for scrap metal. Production cuts in some regions have also contributed to the sharp drop over the past two days.
Large steel mills in western China's Sichuan, Shanxi and Shaanxi provinces will slash average daily steel production by 32,000 tonnes after meeting on September 23 to discuss joint action. The reductions, mainly for rebar, will come from reducing blast furnace operations, reducing scrap using ratios, postponing maintenance ahead of schedule, and rebalancing the product mix.
The cutback in production will reduce demand for scrap metal, forcing mills to reduce scrap prices at a rate unusual for this time of year, when metallurgists are stockpiling ahead of the weekly National Day and gearing up for winter pollution restrictions that could increase dependence on scrap.
Steel prices in China began to decline in September when autumn construction demand fell short of expectations. Since September 3, prices for rebar and hot rolled steel in Shanghai from the warehouse have dropped by $ 30 to $ 520 per ton.
