SteelMint Scrap Conference: Inflection point

SteelMint Scrap Conference: Inflection point

China is generating more ferrous scrap, but it remains unclear how much of it will spill over its borders.

September 13, 2017
Brian Taylor
Conferences & Events Ferrous International Recycling News

The long-booming auto and construction markets in China have ramped up ferrous scrap volumes, just as that nation also has been shutting down scrap-fed induction furnaces. What this means for the rest of the world’s ferrous scrap market is not yet clear, according to presenters and delegates at SteelMint’s 2017 Steel Scrap & Raw Materials Conference Asia.

Steven Vercammen, who is based in Belgium for global consulting firm McKinsey & Co., provided a recap of a report he has co-authored on the topic of China’s emerging ferrous scrap generation.

According to Vercammen, China’s economic planners are aware of the growing volumes of ferrous scrap being generated in their nation, and that China currently uses far less scrap-fed electric arc furnace (EAF) technology compared to the world’s other large economies.

An increasing number of vehicles, appliances and buildings are reaching the end of their life cycles in China, said Vercommen. This means that while one-third of the 180 million metric tons of ferrous scrap generated in China in 2015 could be characterized as obsolete scrap, that percentage may soar to as much as 80 percent by 2030.

In volume terms, that mean’s China’s generation of ferrous scrap could grow to 285 million metric tons per year by 2025. As of 2017, China appears to be consuming only about 140 million metric tons of ferrous scrap per year. “It is important to understand the imbalance,” said Vercommen.

However, he added, steelmakers are already making adjustments to use more scrap in their basic oxygen furnaces (BOFs), exploring and investing in technologies that can allow BOFs to use as much as 50 percent scrap as charge, compared to their traditional 10 percent range.

Both Vercommen and fellow presenter Paul Butterworth of London-based CRU Analysis said Chinese steelmakers also are likely to invest in EAF technology, perhaps on a case-by-case basis as BOF furnaces are retired when they need to be relined.

Such investments will be necessary in light of three other factors: 1) China’s recent clampdown on scrap-fed induction furnace steelmakers, 2) China’s 40 percent duty levied on ferrous scrap exports and 3) the implementation of a nationwide carbon trading and credit system that ultimately will favor scrap-fed production over integrated steelmaking.

Butterworth said Chinese steel production reached “an inflection point” in 2014, when Chinese steelmakers no longer “had to pay a premium for imported scrap.” The availability of suitable supplies of domestic scrap has not only changed how Chinese mills feed their furnaces, but also has had a favorable impact on the profitability of steel firms there, he stated.

Butterworth said global ferrous scrap pricing has for several years been influenced by the “swing capacity” at a handful of mills in Europe that can choose in any given month to either increase or decrease their reliance on scrap.

Such “swing capacity” technology is now gaining favor in China, he added, and the importance of it was demonstrated this year when China’s government shuttered induction furnaces. BOF operators in China, said Butterworth “quickly started ramping up” their use of scrap, first in regions where induction furnaces had been idled, and then in other provinces.

This has been good news overall for the global steel industry, said Butterworth. “The profitability of China’s steel sector means it is less likely to export crude steel—that’s going to benefit steelmakers everywhere,” he remarked. Butterworth said in the first half of 2017 China has exported only half the volume of crude steel it exported in the first half of 2016.

While Vercommen and Butterworth said they see China taking steps to consume its own ferrous scrap, delegates and other presenters at the conference remarked on the growing presence of Chinese ferrous scrap exporters. A delegate from Pakistan said Chinese ferrous scrap traders are not only calling on steelmakers in that nation, but also establishing sales offices in Pakistani cities. And two other presenters commented on the growing trend of ferrous scrap moving south from China to Vietnam, sometimes via the port of Hong Kong.

SteelMint’s 2017 Steel Scrap & Raw Materials Conference Asia was Sept. 11-12 at the Avani Riverside Hotel in Bangkok.


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