Chinese heavy scrap prices up $15

Chinese heavy scrap prices jumped by 100 yuan ($15) over the week as dwindling stocks triggered a round of restocking post-holiday.

"Scrap stocks at some mills have fallen to just 20 days' worth, after they keep operations running through after the holiday," said an industry analyst in Beijing.

Steel mills, including Wuxi Xuefeng Steel, Jiangyin Xingcheng Special Steel, and Jiangsu Suzhou Steel in eastern China, the country's largest scrap market, have raised their bids to up to 3,780 yuan per tonne with tax in the past few days.

Market prices have jumped to 3,720-3,780 yuan per tonne, compared with 3,600-3,700 yuan per tonne before the holidays.

Shagang, the largest scrap consumer in China, has not updated its bids, which were 3,650-3,680 yuan per tonne on January 21, and company officials were not immediately available for comment.

Market participants expect Shagang to raise prices too.

A mill source close to Shagang noted that the steelmaker would soon receive six cargoes ordered from the US, which could partially quench its appetite for scrap.

"In the meantime, some traders are offering heavy scrap at above 4,000 yuan per tonne, but no deal at such prices have been heard yet," said a trader in Changzhou city, Jiangsu province.

"We were running low on inventory before the Chinese New Year, and now it is difficult to find material as recyclers are sitting on scrap, expecting prices to rise further. However, upward room will be limited," he said.

The full 15-day Chinese New Year festivities end with the Lantern Festival on Thursday, after which workers will return completely to work and supply of both steel and scrap will come back, taking away support for prices, he said.

Industry analysts agreed that the scrap price rally was losing steam, noting that spread between scrap and rebar prices was in a normal range at 1,000 yuan per tonne.

In the import market, prices have fallen back to around $445 per tonne cfr Turkey for US HMS 1&2 (80:20 mix), so traders and steel mills are once again looking to book material.

"Prices of $445 cfr Turkey equals $465 cfr China, which is about the same level as domestic scrap," said a trader in Shanghai.