Chinese steelmakers cut their scrap purchase prices steadily this week, following the downward trend in futures and steelmaking raw materials markets, led by Shagang Group, the country's largest scrap consumer in eastern China's Jiangsu province.
Shagang cut its scrap purchasing price by Yuan 30/mt Wednesday, following previous price cuts of Yuan 20-30/mt and Yuan 40/mt respectively on Saturday and Monday, a Shagang official told Platts Wednesday.
After the adjustment, its purchase price for heavy scrap above 6 mm was Yuan 2,240/mt ($365/mt) delivered including value added tax.
Scrap prices have been affected heavily by the drop in futures and spot steel and iron ore prices this week, the Shagang source said.
"We are receiving 200-230 deliveries each day, with 9,000-10,000 mt scrap being delivered every day for the moment," he said.
Shagang has not yet signed annual supply contracts for 2014 with major traders and so is still taking all deliveries on a spot basis. It said it hoped to have some longer-term agreements signed at the end of this month.
Scrap traders with high inventory were under pressure to sell off cargoes, even if at a loss, to raise cash to repay loans, the official told Platts.
Yonggang Group in Jiangsu province has been so well-supplied that it chose to stop scrap purchases temporarily.
"Our inventory is high enough to sustain one month's operation, that is the reason why we decided to stop collecting scrap," a Yonggang source said.
Sources were typically pessimistic for the scrap market in the near future, and suggested further price cuts could be seen during the rest of this week.
Shagang said it could cut its purchasing price by Yuan 50/mt over the following three days, depending on how futures, raw materials and finished steel markets fare over that period.
