China - September 27, 2024

Dropping scrap steel prices pile pressure on Chinese recyclers

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A persistent drop in scrap steel prices in China is squeezing the bottom lines of domestic metal recyclers, with many now operating in the red due to shrinking profit margins.

According to industry watchers, scrap steel has been on a downward trend since earlier this year.

By mid-September, its average price had fallen to around 300 U.S. dollars per ton, a decrease of roughly 20 percent from the same period last year.

For Chinese scrap metal recyclers, the months-long decline in prices has meant painful losses on the books.

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Lai Xiangkuai, general manager, scrap steel recycler:

"Our industry is operating at a loss. The price has dropped by roughly 110 U.S. dollars per ton since the beginning of the year. For example, if we had 10,000 tons of inventory, we would have basically lost 1.1 million U.S. dollars by now. Prices would drop for 20 or 30 days non-stop, but when they rise, it's only for two to four days. Even if we have the opportunity to sell, we barely have the time to do so."

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To mitigate the impact of the ever-dropping prices, recyclers are keeping lower than normal stocks of inventory.

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Qin Guohang, head, scrap steep recycler:

"Under normal circumstances, we have a monthly inventory of around 4,000 to 6,000 tons, but we now keep it below 3,000 tons. We basically need to process and sell the scrap within a day or two before their price falls below our acquisition cost."

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Scrap steel is a vital raw material for steelmaking, with scrap-based production considered both economically and environmentally friendly due to reduced operational costs and carbon emissions.

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