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China’s steel scrap export surge continues

5 Oct 2017, 9.04 am GMT

China's steel scrap export surge continues

Singapore, 5 October (Argus) — China's steel scrap exports continue to rise strongly on a slowdown in domestic demand, but the country's scrap industry association insists the increase is temporary.

Steel scrap exports were 879,663t in January-August, compared with just 1,045t in 2016 as a whole. Taiwan, Indonesia, Thailand, Hong Kong, Vietnam, India and Malaysia have been the biggest buyers of Chinese scrap this year.

Exports in August were 411,220t, more than double the 170,337t shipped out in July, customs data show.

Steel scrap exports have increased as the Chinese government shut down 120mn t/yr of scrap-fed induction furnace capacity in the first half of this year. This freed up millions of tonnes of scrap, some of which was absorbed by blast furnace-based mills and electric arc furnaces (EAFs) while some was exported.

The volume of steel scrap exports is small, and the exports are temporary, said Li Shubin, secretary-general of the China Association of Metal Scrap Utilisation. There is a 40pc export tax on Chinese scrap, which Li said will deter exports — despite the massive jump this year. The country is likely to remain a net steel scrap importer, he said.

China's steel scrap imports are likely to rise to around 2.7mn t this year from 2.16mn t in 2016, said Li.

China's steel scrap use could increase sharply over the next 3-5 years, as scrap generation enters a high growth phase as steel consumption rises, he added.

China's accumulated steel — contained in industrial and consumer products — totalled 8bn t at the end of 2016, with scrap generation of 170mn t. Accumulated steel could hit 10bn t by 2020, lifting scrap supplies to 200mn t. The steel scrap charge in basic oxygen furnaces (BOFs) could hit 20pc in 2020 from 11pc now, according to forecasts from the association.

Hot metal produced in blast furnace is added to BOFs or converters, with scrap used as a coolant. Increasing the proportion of scrap in the BOF would reduce the use of iron ore and coking coal at a certain ratio. The increased use of scrap in BOFs is driven by pricing as well as supply, based on a comparison of what an incremental tonne of iron ore and coking coal would cost relative to scrap.

China's scrap association expects EAFs, which use both pig iron and scrap as inputs to produce crude steel, to eventually have a scrap charge of 80pc compared with 50pc now. Using more scrap in EAFs would reduce emissions, energy and solid waste, Li said.

The 19th party congress later this month could unveil policies to increase the use of steel scrap in China, including extending and raising tax rebates for steel scrap recycling enterprises, he added.

The replacement of iron ore usage by scrap will be significant, but demand for high-grade ore will remain high in the coming years, said Lei Pengxi, chief engineer at the Metallurgical Mines Association of China.

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