SHANGHAI Ferrous scrap
trade proved to be challenging this year in China as prices
remained under pressure, having fallen for almost three
quarters of the year.
Turmoil in Chinas steel
markets drove price volatility, leading many companies in this
fragmented market to face financial troubles.
While scrap prices in China had
largely trended upward since the global financial crisis,
average prices this year are on course to drop 20 percent from
The price swings really
demonstrate the volatile course of the market.
The first quarter was
disappointing, as the typical seasonal rebound in scrap prices
failed to materialize and prices remained steady as demand
difficulties in the steel market began to emerge.
But the problems deepened from
May to September, as the slowdown in Chinas economy and
collapse of its steel and commodities prices gripped the scrap
As steel mills cut
outputcrude steel production declined 1.7 percent year on
year in Augustproducers also wound down raw materials
stocks to more cautious levels.
By early September, heavy scrap
prices hit a low of 2,350 yuan ($373) per tonne, almost 30
percent below levels seen at the start of the year.
As in the steel market, many
traders suffered heavy losses because they were holding
high-priced cargoes before prices headed south, and many market
participants were forced to suspend operations.
"A majority of scrap companies
faced difficulties this year, for their operations were
severely affected by the downbeat steel market," a source at
the China Association of Metal Scrap Utilization told
AMM sister publication Steel First.
Large scrap companies in China,
including China Metal Recycling (Holdings) Ltd. (CMR) and
Chiho-Tiande Group Ltd., were also hit.
CMR managed to post a
4.3-percent increase in its first-half net profit to HK$1.09
billion ($140.6 million), but Chiho-Tiande posted a sharp
85.5-percent year-on-year drop to HK$45 million, blaming the
adverse impact of the dramatic fall in global metals prices,
especially in the second quarter.
Imports of ferrous scrap to
China more than halved in the first 10 months of the year to
4.17 million tonnes, according to Chinese customs data.
Relatively high import prices
hit trade, even though scrap supply wasnt tight in the
As mills struggled to maintain
profitability, they became much more sensitive about input
costs, and correspondingly more cautious about booking imports.
As a result, monthly volumes dropped to 271,451 tonnes in
October from a 2012 peak of 539,553 tonnes in April.
Scrap imports to China still serve only as a supplement to
domestic scrap supply; according to the China Association of
Metal Scrap Utilization, imports accounted for only 3.4 percent
of scrap consumption in the first 10 months of the year.
A version of this article was
first published by AMM sister publication Steel First.