Pollution curbs, iron ore prices lift China’s scrap use

China's ferrous scrap consumption totalled 101.1mn t in this year's first half, up by 15.3pc from a year earlier on the back of higher scrap feed in the basic oxygen furnaces (BoF) of blast furnace-based steel mills.

Chinese steel producers have increased scrap input in the BOF to meet stringent pollutant emissions standards. The average scrap charge in BOFs in the first half was higher by 1.1 percentage points from a year earlier at 20.50pc of the total burden, the China association of metal scrap utilisation (CAMU) said at a scrap conference in Bangkok, Thailand.

A sharp rise in imported iron ore prices after Brazilian Vale's fatal tailings dam collapse at the Feijao iron ore mine on 25 January also encouraged mills to partially substitute ore with scrap.

But with imported iron ore prices falling this month, steel mills have cut back on the scrap charge, which is currently at around 10-20pc of the BOF burden.

Heavy scrap prices in China were an average of 2,800-2,900 yuan/t in the first half, which fell by Yn300-500/t by mid-August. Despite the fall in scrap prices, it still costs around Yn400/t more to produce steel from scrap than iron ore at present.

Scrap resources are tight in China with inventories of steel mills, scrap recyclers and processing enterprises lower than the same period of last year.

Scrap use may be pressured further this year in China as electric arc furnace-based mills are looking to cut output, as these are making losses of over Yn100/t on rebar sales. But the proportion of steel scrap used per tonne of crude steel produced in China will reach 30pc by 2025 compared with 18pc in 2017, said CAMU, mostly because of more steel being produced by EAFs.

source: Argus Media