Shagang cuts heavy melt scrap price

China's largest private-sector steel producer Jiangsu Shagang has cut its heavy melt scrap purchase price for the first time since late July, tracking recent weakness in domestic steel prices.

Chinese's biggest ferrous scrap consumer will pay 2,620 yuan/t ($383/t) for heavy melt scrap from today, down by Yn50/t. The latest drop comes after three price increases for an increase of Yn330/t since late July.

The price is for heavy melt No.3 grade scrap with a minimum thickness of 6mm delivered to Shagang's mill in Zhangjiagang, north of Shanghai. It includes a 16pc value-added tax.

The reversal in the scrap price trend follows a slide for finished steel prices in China.

Shanghai spot prices for rebar have dropped by Yn60/t to Yn4,440/t ex-warehouse for HRB400 grade rebar with 16-25mm diameter since Shagang last changed its scrap purchase price on 23 August. Shanghai hot rolled coil (HRC) prices have fallen by Yn40/t to Yn4,370/t ex-warehouse in Shanghai over the same period.

January futures for rebar closed down by 1.09pc to Yn4,086/t on the Shanghai futures exchange.

China's ferrous scrap prices have been supported by mills' increased use of scrap in blast oxygen furnaces to offset reduced pig iron output. Widening pollution restrictions have reduced operations of blast furnaces, iron ore sinter plants and coke batteries.