en.Wedoany.com Reported - China's scrap steel market is expected to face downward pressure in June, as weakening steel demand and falling finished steel prices may reduce steel mills' demand for scrap. Market participants believe that steel enterprises will lower raw material procurement prices amid seasonal demand weakness and deteriorating steel margins.
From May 6 to 29, China's composite scrap steel price (including 13% VAT) averaged 2,518 yuan/ton ($372/ton), up 1.6% month-on-month from April. This increase was mainly supported by tight scrap supply and resilient steel production, with demand maintained despite varying downstream conditions. June marks the start of the traditional summer off-season, with rising temperatures and seasonal rainfall expected to weaken steel consumption and put additional pressure on finished steel prices.
Market participants noted that scrap has gradually lost cost competitiveness relative to molten iron. As of June 1, the average cost of using scrap for steelmaking (excluding VAT) at integrated mills in Jiangsu Province was 2,213 yuan/ton, about 4 yuan/ton higher than using molten iron. Consequently, blast furnace-based steel mills are increasingly favoring molten iron over scrap. Electric arc furnace-based producers continue to face profitability challenges, with market sources indicating that as of June 2, the 76 tracked electric arc furnace steel mills in China averaged a loss of 5 yuan/ton on rebar sales, limiting incentives to increase scrap consumption and potentially leading to production cuts.
Despite weak demand expectations, scrap steel prices may gain some support from tightening supply. As temperatures rise, scrap processors are expected to reduce operating hours, and heavy rainfall in multiple regions may disrupt scrap collection, processing, and transportation activities.
China's scrap steel prices are expected to soften in June, driven by seasonal steel demand weakness, falling finished steel prices, and poor scrap competitiveness relative to molten iron, all of which will dampen consumption. Reduced scrap generation, weather-related disruptions, and tighter collection activities may help limit downside risks and prevent a sharp correction.
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