Shanghai 12 January 2011 04:13
Heavy scrap prices are set to rise faster as traders start hoarding material this week after Shagang raised its bids over the weekend.
Prices of ferrous scrap above 6mm thickness have risen in the market to 3,440-3,550 yuan ($519-535) per tonne delivered, up 50 yuan from last Friday.
"Average scrap stocks with steel mills currently stand at 20-30 days' worth, and steel mills usually pile up more than 40 days' worth for the week-long Chinese New Year holiday," said a steel mill source in eastern China.
"Thus, scrap prices are likely to pass 3,600 yuan per tonne at the end of the month."
Shagang, China's largest consumer of ferrous scrap, raised its bid for heavy scrap to 3,440-3,530 yuan per tonne on Sunday, up 250 yuan from mid-December.
Other steel mills including Jiangsu Susteel and Changzhou Zhongtian have all since raised their bids to Shagang's levels.
"Shagang's price adjustments are regarded as signposts for the market. An increase by hundreds of yuan will give support to the market rally," said industry analyst in Shanghai.
Shagang was not available for comment.
"In addition, the increasing international scrap prices will also push up domestic scrap prices. But Chinese mills have to pay $20-30 more on top of Turkish mills' prices due to freight differentials, which will make imports impossible," said a Baosteel source.
MB's Ferrous Scrap Index rose slightly to $509.36 per tonne cfr Turkey basis HMS 1&2 (80:20) on Tuesday.
Industry sources said Shagang last week booked five or six cargoes of US HMS 1&2 (80:20) at $505-510 cfr China, noting that the relatively lower price was due to the large quantities.
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