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Case Study 2 - Scrap Steel Report

Contents

I. 2007 China's scrap steel market analysis
II. Scrap steel prices in some areas of China (December 3-11, 2007)
III.China's scrap steel market forecast for 2008
IV.Scrap steel import procedures

Part I - 2007 China's scrap steel market analysis

In 2007, China's demand for scrap steel resources is experiencing a chronic shortage. As a result of substantial increases in China's crude steel production, the 2007 scrap steel market followed the increasing trends of the 2006 market. So, scrap steel resources are very tight and the domestic scrap steel resources gap cannot supply the industry demand. This situation makes the Chinese scrap steel market very competitive and dynamic for steel industry customers and suppliers.

Part II - Scrap steel prices in some regions (December 3-11, 2007)

A. Northeastern & Northwestern China
(Note: all prices are Chinese RMB/1000Kg)

Region	Heavy Scrap	Medium Scrap	Shear Scrap	Mixed Scrap	Thin Scrap	Remarks
Fengcheng, Liaoning	2750	2550-2600		2400	2350	Tax-included price
Shenyang, Liaoning	2700	2500-2600		2200-2300		Tax-included price
Fushun, Liaoning	2600-2620					Tax-included price
Dalian, Liaoning	2630-2800					Tax-included price
Harbin, Heilongjiang	2470	2250		2050		Tax-included price
Baotou, Inner Mongolia	2600
Tongchuan, Shanxi	2500	2450		2400		Delivery price
Lanzhou, Gansu	2550	2450-2500		2400	2300	Warehouse delivery price
Alataw, Xinjiang				2500

B. Northern China
(Note: all prices are Chinese RMB/1000Kg)

Region	Heavy Scrap	Medium Scrap	Shear Scrap	Mixed Scrap	Thin Scrap	Remarks
Taiyuan, Shanxi	2550-2750	2550		2550-2650
Tangshan, Hebei	2600-2650
Shijiazhuang, Hebei	2650
Xingtai, Hebei	2750-2800	2600		2450-2550	2500
Tianjin	2680-2950
Beijing	2950-2970

C. Eastern China
(Note: all prices are Chinese RMB/1000Kg)

Region	Heavy Scrap	Medium Scrap	Shear Scrap	Mixed Scrap	Thin Scrap	Remarks
Shanghai	3020
Taizhou, Zhejiang	2950-3000	2920	3050	2900
Nanjing, Jiangsu	3000			2700
Wuxi, Jiangsu	2950-2970				Tax-included price
Zhangjiagang, Jiangsu	2990-3010					Tax-included price
Jinan, Shandong	2830-2850					Tax-included price
Wangjiang, Anhui	2750	2600	2600-2650	2500		Tax-included price
Bozhou, Anhui	2740	2500		2600		Tax-included price

Notes

1. Currently, China's various regions scrap steel prices are still showing a rising trend.
2. Heavy Scrap: Form factor weight ≤1500mm X 800mm, Thickness ≥6mm, Single weight: 2kg～1500kg, Solid diameter cylindrical body ≥12mm.
3. Medium scrap: Form factor weight ≤1000mm X 500mm, Thickness ≥10mm, Single weight : 3kg～1000kg, Solid diameter cylindrical body ≥20mm.
4. Mixed Scrap: Form factor weight ≤1000mmX800mm, Thickness ≥2mm, Single weight: ≤800kg, Solid diameter cylindrical body ≥4mm.
5. Thin Scrap: Form factor weight ≤1000mmX1000mm, Thickness ≥2mm, Single weight: ≤100kg ②Form factor weight ≤800mmx600mmX500mm

Part III - China's scrap steel market forecast for 2008

The Chinese scrap steel market forecast for 2008 is for a continuing short supply of scrap steel. Therefore, the scrap steel prices will maintain a basic upward trend. However, as scrap prices increase and narrow the price gap with general steel prices, scrap prices are expected to stabilize.

Part IV - Scrap steel import procedures

China requires various approvals for scrap steel imports. Scrap steel importers need a commodity inspection certificate, import licensing, and import licensing for raw materials under a solid waste permit.

Recommendations

1. At present, not all corporations in China have eligibility to import scrap steel. Only a few large companies have the necessary licenses and they are willing to deal only with serious suppliers in the steel industry. Dragon Mountain will give your company professional representation to the Chinese scrap steel buyers.
2. The Chinese market for scrap steel is healthy and growing, but complex. In particular, different import tax provisions pertain to various commodities (typically 17% for scrap steel materials), and transportation costs can vary greatly to different regions of China. Dragon Mountain can clarify the details for each shipment.
3. A foreign supplier who is interested in understanding the Chinese steel market and its dynamics can ensure a long term clientele for its sales. Dragon Mountain can help you build a strong relationship with Chinese steel customers and monitor interesting developments in the steel industry for you.