Steel scrap is gaining importance in Chinese market and this could be a concern for the industry. There are two reasons why supply of scrap is expected to increase :
- The Chinese government’s directive to eliminate obsolete and illegal scrap-fed induction melting furnaces in the country by June 30, 2017. This according to industry estimates, consumes around 40 million tons of scrap.
- Increase of scrap generation due to end of life cycle of industrial and house hold goods which are expected to grow at 5% per annum. According to reports, country generates around 175-180 million tons of scrap (however official data says, it is around 100-120 million tons).
The global scrap generation in 2015 stood at 650 million tons, out of which 177 million tons was from China, which is about 27%. Total seaborne trade of scrap stands at 84 million tons, out of which China imports only 2-3 million tons.
With the expansion of Chinese steel industry, the scrap generation also rose by almost 14% per year, today it is the world’s biggest scrap generator and user. For almost 15 years, bulk of the scrap volume came from home and prompt scrap which was increasingly generated during steelmaking and downstream manufacturing process.
Trends indicate that china has already entered the infrastructure and product replacement phase; this is exemplified by the increasing percentage of obsolete scrap in the scrap mix.
Future of Chinese Steel Scrap?
On one hand scrap generation is set to rise significantly and on the other, Chinese steel production is expected to decline by almost 1% per year driven largely by declining domestic demand, decline in exports owing to protective measures adopted by countries and efforts made by government to rationalize the steel industry. This throws a lot of interesting and intriguing questions like
- What will happen to the increasing quantities of scrap getting generated
- Will the charge rates of BOF be increased
- Will there be switch over from BOF to EAF
- Will the iron ore imports decline
- How will the steelmaking profitability be effected
- Will the Chinese scrap disrupt the global scrap trade dynamics