Some Chinese steel mills are responding to the strong domestic scrap price by switching back to using higher proportions of iron ore in the burden mix. An S&P Global Platts analysis of the relationship between iron ore and scrap prices shows that there has been a significant divergence for the first time since 2013. The fast-rising scrap market has outpaced iron ore prices, making iron ore the most cost-effective raw material for mills. Based on the analysis, domestic scrap is statistically $31/mt overvalued, when compared with iron ore (using historical pricing data from May 2013 to February 2018). Iron ore prices have diverged from scrap, suggesting scrap may currently be overvalued The interplay of iron ore and steel scrap in China is seen as a barometer of the health of the two predominant steelmaking routes – blast furnace and electric arc furnace – and can suggest which route may have the upper hand in terms of competitiveness. The scrap market tends to move in line with iron ore in China. Over the past five years, the price differential between domestic scrap and iron ore imports has averaged $200/mt. However, since scrap prices began to elevate precipitously in October 2017, the… continue reading
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Source: CTRM Center