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What is the reason for the drop in scrap price?
Following the drop of SG scrap price by 250 yuan/ton on Tuesday, Wednesday and Tuesday, the major steel mills in Jiangsu collectively followed suit, and the market confidence was seriously frustrated. On the one hand, the continuous decline in billet prices makes the spot trading of finished products bleak. According to the investigation results of MySteel7 July 13, the ex-factory price of ordinary billets in Tangshan area is 3,700 yuan/ton, and the average gross profit loss of steel mills is 332 yuan/ton. It can be seen that steel mills are still in a situation of high inventory and high losses, and most steel mills are gradually entering the stage of shutdown and maintenance (see figure 1). Whether it is a long process or a short process, the consumption of scrap steel in steel mills may continue to decrease, and the short-term demand for scrap steel is difficult to release. On the other hand, with the arrival of high temperature and rainy season, the construction of downstream garbage production projects is weakened, and the start-up time is correspondingly reduced. In addition, the market situation is sluggish, most enterprises are reluctant to sell, and the circulation of low-priced scrap steel resources is tight. Therefore, under the predicament of weak supply and demand, production cost has become the dominant factor affecting the price change of scrap steel. In order to reduce the cost, we have to continue to reduce the price of scrap steel. As a result, SG lowered the price of 80 yuan/ton this morning, and a new wave of price drop struck again.

According to Mysteel's preliminary statistics, since June 15, 39 blast furnaces have been inspected by sample enterprises nationwide, with a cumulative capacity of 49,560 m, and the daily output of molten iron has decreased by143,700 tons; 20 electric furnaces were inspected, and the daily output of crude steel decreased by 50,600 tons; The rolling line under construction is 3 1 strip, and the cumulative daily output of finished products is 93,500 tons. It can be seen that July has become a centralized month for unified maintenance of steel mills, which can not only remove inventory, but also solve maintenance problems. Both the supply side and the demand side of the steel market will usher in a trend change in July, so the steel price trend in July may continue to fluctuate within a narrow range around the breakeven point of steel mills, which will also be an important factor affecting the current national scrap price.

As can be seen from the following figure, since July, the arrival of SG has changed in a cliff-like manner. The main reason is that after each wave of price decline, the market will be more bearish, and businesses will avoid risks and speed up shipments, resulting in a sharp increase in arrival. However, due to the limited output at the end of scrap production and the shortage of scrap resources in society, the arrival of SG dropped significantly after peaking and began to fluctuate within a narrow range. According to Mysteel data, on July 14, the leading steel enterprises in East China discharged 17300.36 tons of scrap steel yesterday, a decrease of 2.8% compared with the previous day. Up to now, * * * has 57 ships, 5 seagoing ships and 485 vehicles (8 vehicles were pressed yesterday). Recently, the arrival volume of steel mills has not increased or decreased much. However, in view of the fact that the current arrival volume of SG is higher than the average daily consumption level and the inventory is still increasing, the phenomenon of unloading is obvious, which can alleviate the pressure of high-cost inventory.

Price According to statistics, from June to yesterday, the price of raw material scrap steel of SG has dropped by 800- 1000 yuan/ton. It is considered that this frees up space for steel mills to reduce costs and gives old scrap iron a chance to breathe. However, yesterday, the black main contract continued to fall across the board, and the scrap price was further suppressed at 3,900 yuan/ton during the superposition period. Today, the price of 80 yuan/ton was passively lowered, and the price of heavy waste fell below 29,200 yuan. From the profit point of view of raw material cost, the continuous and deep decline of scrap steel will enter the stage of valuable but no market. At present, the scrap steel industry needs costs in purchasing, processing, loading, price forecasting, scrap steel trade and customer maintenance, steel unloading, ecology and inventory. With such a deep drop, the enthusiasm of scrap suppliers will decline again. By then, scrap steel will bottom out after this wave of price drop.

Summary: The fundamental reason for the rise and fall of this round of scrap steel lies in the weak sales of finished steel products. The continuous bottoming in the futures market has repeatedly dragged down the spot steel price. Steel mills continue to be in the loss stage, actively overhaul, increase output, reduce the enthusiasm of scrap steel and suppress the price of scrap steel. Therefore, in the short term, the trend of scrap price is still dominated by the price of finished products and the transaction situation. In addition, in the context of the current sluggish demand, the overall prices of steel and scrap steel will continue to decline weakly, while the whole raw material variety of scrap steel lacks the right to speak, and the decline will continue. In stages, basically yesterday's finished product trend is the next day's scrap trend.

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