UK ferrous scrap bulk cargo sale made to China

A UK ferrous scrap exporter was heard to sell a bulk cargo of ferrous scrap to China last week, which is the first deep-sea bulk purchase from outside Asia made by a Chinese buyer since the country restarted imports of ferrous scrap in January 2021.

The cargo was heard sold last week at a highly competitive price relative to the Chinese domestic scrap price, prior to a sharp fall in Chinese steel prices on Monday this week.

The composition of the cargo was unknown, but it would need to carry grades higher in quality than HMS 1/2 80:20 in order to meet China's import standards.

Heavy melt no. 3 (thickness above 6mm) in Shagang fell by 120 yuan/t to Yn3,500/t on Tuesday, equivalent to $465/t excluding VAT. This domestic price has fallen by a total of Yn320/t ($47.80/t plus 13pc VAT) in the past eight days since Chinese domestic steel prices began falling amid weak demand.

China resumed imports of ferrous scrap under new stringent quality standards on 1 January 2021. Ferrous scrap sales into China since that reopening have been dominated by Japan, which accounted for more than 70pc of all Chinese ferrous scrap imports in the past 18 months. Small container tonnages have been sold from Europe and the UK in that time but customs data indicate no Chinese import volumes large enough to be a bulk shipment.

But a window for viable bulk sales from the UK and Europe into China, along with other Asian markets, opened after international ferrous scrap prices plummeted throughout April, May and June. The Argus HMS 1/2 80:20 cfr Turkey steel scrap assessment fell $306/t from $660/t cfr on 28 March to $354/t cfr on 20 June.

This drop in the Turkish price has been accompanied by a sharp fall in bulk freight rates for vessels shipping from the Atlantic basin, which has enabled European exporters to offer more attractive pricing than was available for containerised seaborne scrap, bulk cargoes from the US west coast and Australia, smaller bulk cargoes from Japan, and Asian domestic markets.

Estimates for the UK-China freight rate for a bulk cargo range as low as $60/t. A continental European exporter was given a rate of $52-53/t to India this morning.

Appetite from the UK and Europe to sell into Asia has been met with demand to buy from multiple markets, with sales of both shredded cargoes and combined cargoes including HMS 1/2 to Pakistan, Vietnam and Bangladesh completed in the past 10 days.

By Alex Reynolds