Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Chinese steelmaker, Shagang Steel has lowered domestic ferrous scrap purchase prices by CNY50/mt ($7.3/mt) effective Sep 24. The decline in steel futures ahead of the Golden Week holidays made steelmakers, including Shagang, cut prices. The demand for rebar in China remains has failed to keep up the pace estimated earlier, with a ripple effect on scrap prices.  


After the revision, bids for domestic HMS scrap were at CNY2,690/mt ($395/mt) delivered plant in Jiangsu province, down by CNY50/mt from the last set of prices announced on Sep 16. Prices fell by a total of CNY110/mt in a month, with the mill reducing bids three times. In August, prices had hit a 13-month high at CNY2,800/mt delivered its mill in Zhangjiagang inclusive of 13pc value-added tax. 


On Tuesday, the weekly Davis Index for HMS 1&2 (80:20) settled at CNY2,730/mt, down by CNY110/mt delivered mill, pressured by softening steel prices. Chinese mills have lowered HRC export offers for buyers in Vietnam and Taiwan after domestic demand slowed. Rebar trades concluded at CNY3,640/mt ex-works, down by CNY120/mt since the beginning of the month. 


Domestic billet remains under pressure

Offers for billets in China’s domestic market are at CNY3,320-3,330/mt ($487-488/mt) ex-Tangshan, after hitting a one-year high of CNY3,500/mt ex-Tangshan two weeks ago. 


Mills are focusing on liquidating their built-up stock and rebar inventories have fallen to a seven-week low, informs a trader. Inventories are also dipping since end-users are looking to restock before they go for the week-long holiday. In the northern region, major steelmakers like Benxi and Angang steel are likely to announce maintenance activities in early October, impacting daily HRC output by 30,000mt.

Chinese billet imports have also slowed down. Uncertainty looms in the global market with the possibility of a second wave of COVID-19 in Europe. Thus the $ has also strengthened against the European currencies EUR and £. 


Iron ore prices decline 

Before the rainy season, China had imported high volumes of iron ore. A decline in production due to the wet season has thus led to inventory pile-ups and iron ore stocks are 30pc higher than usual levels. Iron ore import prices have dropped to $114.4/mt cfr China for 62pc Fe content from the peak of $130/mt cfr China. Thus, EAF utilization is comparatively better with more mills booking domestic scrap. 





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