China now tapping into ferrous scrap reservoir

Another step in China’s economic shift away from intensive infrastructure building may be showing up in the form of more available ferrous scrap in that nation.

Steel industry analysts have long considered China’s steel industry as operating above capacity, and in 2015 its total steel output has finally showed signs of having peaked.

In addition to needing fewer raw materials at its steel mills, China may also be able to secure more supplies within its own borders in the form of salvaged automobiles and appliances and demolished buildings.

A news report on the website of The Australian newspaper quotes a securities analyst’s report that sees significant changes setting in.

The article notes that iron ore producer BHP Billiton has backed away from its prior forecast that China would peak at 1.1 billion metric tons of steel production and now foresees that it already is heading toward an annual production figure of 800 million metric tons.

In addition to needing less iron ore because of reduced output, China’s steelmakers may also turn more heavily to locally generated iron and steel scrap, says the article’s author, John W. Miller.

At the same time China’s steel producers have been reducing output of finished product, the amount of ferrous scrap “available for recycling now stands far beyond the level that would be typical for an economy its size, at around five metric tons per capita,” according to Miller, who cites an analysis by Morningstar.

“In adjusted gross domestic product per capita, China now matches Japan’s level of development in 1968. At that time, the Japanese economy had 2.9 metric tons of steel per capita,” adds Miller. “And in the next decade, as the country’s consumers and businesses start recycling their first generation of [shipping] containers, cars and appliances, the steel [scrap] glut will be compounded.”