China: Scrap prices expected to remain under pressure in August amid weak steel demand

• • Seasonal slowdown continues to weigh on demand

• • September demand recovery expectations support market sentiment

China’s ferrous scrap market is expected to remain under pressure through August as sluggish finished steel demand, lower steel production, and shrinking mill margins continue to weigh on raw material consumption. Steelmakers, particularly electric arc furnace (EAF) producers, are expected to maintain cautious procurement strategies as the market remains in the seasonal summer slowdown.

The average domestic scrap price declined by 2.5% m-o-m in July, reflecting weaker demand from both blast furnace (BF) and EAF mills. Production cuts continued across the sector, with BF capacity utilisation falling to 88.5% and EAF utilisation dropping to 55.4%, reducing overall scrap consumption. At the same time, only about one-third of Chinese steel mills remained profitable by the end of July, prompting mills to lower raw material purchase prices.

Despite the bearish demand outlook, the downside for scrap prices may remain limited. Seasonal weather disruptions continue to constrain scrap collection and processing, while inventories at major scrapyards declined during July, indicating relatively tight domestic scrap availability. Market participants also expect steel demand to gradually recover towards September, which could lend some support to scrap prices later this month.

Note: This article has been published in accordance with a content exchange agreement between Mysteel Global and BigMint.