BIR Global eForum: Focus on lower emissions should benefit ferrous scrap use
Emissions reductions benefits of melting scrap could provide a market boost in the next two decades.
Photo by Brian Taylor.

BIR Global eForum: Focus on lower emissions should benefit ferrous scrap use

London-based analyst says use of scrap is undeniable method to lower steelmaking’s carbon footprint.

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June 10, 2020

Although the iron ore-fed basic oxygen furnace (BOF) steelmaking process dominates in the world’s two largest steel production nations—China and India—global pressure to reduce carbon dioxide (CO2) emissions should make the use of scrap more desirable in the next 20 years. That was the encouraging perspective offered by Renate Featherstone, who works from the London office of Scotland-based Wood-Mackenzie and was the guest speaker at an online Bureau of International Recycling (BIR) Ferrous Division meeting on June 9.

Featherstone said China’s steel sector is so skewed toward BOF output that it is the one place where “EAF profitability is worse” compared to BOF production. “Part [of the problem] is an inflated scrap price caused by Chinese import restrictions,” added Featherstone.

China, like most other nations, is a signatory to the Paris Climate Accords pledging CO2 emissions reductions. Featherstone said the accord should provide a boost toward “green” steelmaking, which could take many forms.

Scrap-fed electric arc furnace (EAF) production will play only a limited role in China, predicts Featherstone. She said only 12 percent of China’s steel was made via the EAF method in 2019, and that figure may only grow to about 16 percent “over the next couple of decades.”

Even if the Chinese government lifts some of its ferrous scrap restrictions, as has been reported, the nation’s producers are heavily invested in BOF technology. A likely scenario is an emphasis there on emerging methods such as those from Austria’s Primetals Technologies that can allow BOF facilities to melt more scrap or alternatives such as direct reduced iron (DRI).

Beyond China, “EAFs will fare better,” stated Featherstone. By 2026, she predicted EAFs will have 30 percent global market share, and by 2040, 34 to 35 percent. “Crucially, outside of China and India, that figure would be as high as 52 percent,” she added. “There is further upside for scrap coming from ‘green’ steel.”

Questioned by George Adams of United States-based SA Recycling whether lower iron ore demand would lead to low pricing and then a rebound in iron ore use, Featherstone replied her scenario “does assume government policy to incentivize” the use of scrap. She made the comparison that most governments are not allowing the “burning of coal in houses, no matter how cheap it gets.”

As far as immediate impacts from COVID-19 and accompanying restrictions, Featherstone said Wood-Mackenzie is predicting that steel demand globally in 2020 will fall by around 8 percent. She added there is a “clear divide between China and rest of world.”

Chinese demand in 2020 seems poised to remain within 1 percent of where it was in 2019. Production in China “barely missed a beat” even during its lockdown, said Featherstone, meaning the steel will be absorbed either in China or neighboring nations.

Also at the meeting, Ferrous Division Statistics Advisor Rolf Willeke provided an overview of the 11th edition of its “World Steel Recycling in Figures” handbook, which was released in late May.

Willeke noted that ferrous scrap consumption rose by 3.4 percent globally in 2019 compared with the year before. Turkey remained the world’s largest ferrous scrap importer, while “India reinforced its position as the second largest, with an 11.4 percent increase” in scrap imports, according to Willeke.

Reporting from India, BIR Ferrous Division board member Zain Nathani of Mumbai-based Nathani Group said that nation is “finally starting to open up” after “a very hard lockdown since the middle of March.”

Regarding that severity, the entire nation of 1.4 billion people had “zero auto sales” in April, said Nathani. “You can just imagine the impact on all the downstream sectors,” he added, mentioning makers of auto components and steel—and recyclers of ferrous scrap.

Concluded Nathani, “It has been very tough. The next few months, it’s going to be extremely challenging, especially if [COVID-19] cases go up.” The nation’s leaders will continue “trying to find the balance between opening up and keeping people healthy,” he remarked.