China's scrap imports fall with higher overseas prices

China's ferrous scrap imports slipped in June as demand dropped in response to falling domestic steel prices in May.

June imports fell by 32.9pc to 68,000t from May, taking January-June imports to 256,000t, according to China customs data.

Japan and South Korean still remained the two main suppliers, although both fell significantly from the previous month. Suppliers allocated more volumes to their domestic markets on firmer demand and higher prices.

Canadian scrap cleared the first trial batch of 160t in June. Buyers indicated that Canadian containerised plate and structural (P&amp;S) was offered at a more competitive price than other major suppliers.

Imports from the UK continued to grow since the first arrival in May, up sevenfold to 1,700t in June.

Chinese buyers' appetite faded rapidly after domestic steel prices plummeted since mid-May because of the government's efforts to rein in commodity prices. Squeezed profit margins prompted steel mills to be more cautious about raw material purchases.

Imports in the coming months are expected to edge lower because of a wide price gap between domestic and imported scrap, coupled with Beijing's plan to cut crude steel production in the second half of the year. "The [seaborne scrap] price is not attractive, and we don't need that much scrap if have to produce less steel," a Chinese mill official said.

The Chinese domestic scrap price fluctuated lower on expectations of reduced production. The similar grade of import HRS101, heavy melted scrap with thickness greater than 6mm, was now priced at $525/t and $476/t by Shagang and Rizhao Steels respectively without 13pc value-added-tax.

China ended a ban on scrap imports in January .

Strict inspection requirements by Chinese customs have restricted imports to premium-grade scrap, which was in tight supply globally. Prices of Japanese high-grade scrap increased steadily on the back of firm demand from blast furnace mills in Japan and South Korea. Japanese HS, or Chinese HRS101, is currently offered at a minimum price of $600/t cfr China, which Chinese buyers felt was too expensive. Containerised P&amp;S, another equivalent grade of Chinese HRS101, was offered at a much more competitive price at around $530/t cfr but was still higher than Chinese domestic prices.

The import data is for ferrous scrap HS codes 720410, 720441 and 720449 that excludes categories for stainless steel scrap and alloyed steel scrap.

China ferrous scrap imports (t) June May % &#177; vs May Jan-June Japan 56,641 74,655 -24.1 196,070 South Korea 7,776 23,724 -67.2 47,894 Hong Kong 1,967 1,959 0.4 7,572 UK 1,668 204 717.6 1,872 Others 298 1,249 -76.1 2,537 Total 68,350 101,791 -32.9 255,945 Source: China customs

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