China begins imports of ferrous scrap: Update

Adds enquries for European HMS material in paragraph six

Two Chinese buyers bought Japanese scrap on 1 January, the first day that the new Chinese scrap import standards and HS codes came into effect.

Ouyeel — a trading subsidiary of China's Baowu Steel Group — bought 3,000t of HS scrap from Japanese scrap supplier Mitsui, while recycling firm Zhejiang Judong bought 2,800t of HS from Heiwa Shoji.

Negotiations for both deals were heard to have started in November-early December and they were finalised once Beijing officially implemented the new ferrous scrap import standards. Both cargoes will be shipped from Japan early this month.

The concluded prices for the deals were not disclosed, but are expected to be significantly lower than current Asian seaborne market levels because Japanese scrap prices surged in November. Many market participants said the two deals are mainly for trial purposes as there are limited enquiries from China on the seaborne market. Imports of larger volumes are unlikely in the near future because of the huge price gap between Chinese domestic and global seaborne scrap prices.

Chinese domestic scrap benchmark — Shagang's #3 heavy melt price — today was at 3,020 yuan/t ($467/t), including value-added tax of 13pc. Japanese offers for HS, which is similar to #3 heavy melt in China, were $495-500/t cfr.

Chinese enquiries for European HMS 1/2 80:20 and HMS 1/2 75:25 were heard this afternoon, which effectively ended the speculation that HMS material may not be allowed to be imported into the country. HMS 1/2 80:20 is the most commonly traded seaborne grade of ferrous scrap.

Baowu, a state-owned steel manufacturer headquartered in Shanghai, is one of the world's largest steelmakers. Zhejiang Judong is a recycling firm that handles various recyclable materials and runs scrap processing centres in eastern China.