Scrap predicted to play bigger role in China's steelmaking industry

A worker processes scrap metal at a Dongbei Special Steel Group plant in Dalian, Liaoning province. [Photo by Liu Debin/China Daily]

China's iron ore demand is expected to see a continuous decline in the next few years, due to growing awareness of environmental protection and increased consumption of scrap steel, experts said.

In 2020, China's iron ore consumption is expected to reach 960 million metric tons, a decline of 150 million tons year-on-year, according to a research note from Industrial Securities.

"In the future, with more scrap being used by Chinese steel companies, iron ore demand will drop gradually," it said.

As a greener material in steelmaking, scrap helps to realize the aim of energy saving and emissions reduction in the iron and steel industry, by reducing the manufacturing processes required.

Since the beginning of this year, the scrap ratio has markedly increased in China's steelmaking industry.

Consumption of scrap steel in China was 25.3 million tons in the first quarter of this year, an increase of 29.7 percent year-on-year, with a scrap ratio of 12.58 percent, up from11.1 percent in 2016.

However, the average global scrap ratio was 51.6 percent, with the figure reaching 75.6 percent in the United States and 90 percent in Turkey.

Generally speaking, the proportion of scrap used in China's steel industry is around 2 to 3 percent.

Coke prices have increased at a rapid pace since last July, greatly increasing the cost of smelting steel with iron ore.

However, scrap prices are lower, and more companies are trying to increase the scrap ratio in steel production, said Gan Yong, president of the Central Iron & Steel Research Institute.

In 2015, the Iron and Steel Industry Adjustment Policy issued by the Ministry of Industry and Information Technology pointed out that China's steelmaking scrap ratio should reach30 percent.

The China Association of Metal Scrap Utilization's 2016-20 plan, published last December, said that China's scrap steel ratio should reach 20 percent by 2020.

China's steel output and consumption have now both reached saturation point, and the period of rapid expansion is over, the research note said.

With the elimination of inferior steel, more scrap will enter the market, because 65 million tons of waste steel was used to make inferior steel, said Li Xinchuang, president of the China Metallurgical Industry Planning and Research Institute.

"The steel from electric furnaces is expected to increase significantly," Li said.

The CAMU predicted that China is expected to have 10 billion tons of steel by the end of 2020, with waste steel accounting for the production of around 200 million tons.