China Ferrous Scrap Imports Fall 82% in H1 2019; Exports Nosedive

China - world’s largest consumer of ferrous scrap, has witnessed its scrap imports in H1 2019 reaching the record low levels since the data maintained by SteelMint, with the imports in this period recorded at just 155,685 MT, dropping by 82% Y-o-Y, in comparison to 856,413 MT in H1 2018.

The stricter regulations imposed by the government against import of recycled and solid waste materials is seen as the main reason for the sharp drop in imports. With the new rules requiring import licenses from July’19 in order to import ferrous scrap and other solid waste products, the scrap imports are likely to decrease further in the coming days.
On a quarterly basis however, the scrap imports increased by 53% Q-o-Q as the country imported 94,055 MT in Q2’19 as against 61,630 MT in Q1’19, while monthly imports recorded a growth 72% M-o-M with 44,179 MT of scrap imported in June’19.

Major exporters of ferrous scrap to China were Japan, South Korea and Hong Kong, all of whom witnessed sharp drop in their supply to China on account of government regulations aimed at promoting domestic scrap.

China’s scrap exports completely plunge all through the first half of 2019, as the country exported just 2202 MT ferrous scrap in H1 2019, recording a huge drop of 99% on year against 330,897 MT of exports registered in H1 2018, according to customs data maintained with SteelMint. The heavy export duty of 40% levied on scrap exports in the later part of 2018 has made export of ferrous scrap almost non-viable for Chinese supplier, in addition to which the strict port inspection too have contributed to the export figures dropping to near negligible levels.

Chinese steelmakers reliance on domestic scrap is growing rapidly with increasing EAF based steel production. For major eastern provinces in China, the average domestic scrap purchase price of HMS scrap (6mm-10mm) saw an uptrend in the 2nd quarter and by the end of Q2’19, the same was recorded at RMB 2,700-2,730/MT (USD 393-398) inclusive of 13% VAT, as against RMB 2,628/MT in Q1'19.

As per recent BIR reports released, in the first three months of 2019, there was a further 14.1% rise in China’s steel scrap usage for crude steel production to 45.6 MnT, up from 39.97 MnT for the same period in 2018. Most of China’s BOF mills have actively increased their scrap input increasing scrap use ratio to currently around 25-30%.