China’s scrap use in steel dips to 21.18% in May

After rising for the three prior months, steel scrap utilization in the crude steel produced by the 211 Chinese steel mills sampled in Mysteel’s regular survey decreased in May, reversing down by 2.53 percentage points on month to 21.18% on average. The survey samples integrated and electric-arc-furnace (EAF) producers, as well as those mills using both blast furnace (BF) and EAF technologies.

As of end-May, these 211 surveyed mills held 4.41 million tonnes of steel scrap in inventories, or lower by 87,400 tonnes or 2% on month. Their total scrap consumption during May also edged down by 388,400 tonnes or 13.4% on month to 2.51 million tonnes, the survey showed.

Scrap use in domestic steel output declined mainly because of the decrease in usage among mills using both BFs and EAFs, survey respondents said.

For example, steel scrap utilization among the 24 sampled mills using both technologies averaged 22.85% last month – equivalent to 489,900 tonnes of steel scrap in volume – which was lower by 6.39 percentage points or 94,500 tonnes compared with April.

“Most mills using both steel scrap and hot metal usually raise their scrap ratios when scrap is more cost-effective than hot metal,” a Shanghai-based market watcher explained. “Last month, the decline in both iron ore and coke prices helped to reduce the steelmakers’ hot metal production costs significantly, prompting these mills to be more willing to use hot metal rather than scrap in steelmaking,” she said.

For example, as of end-May, the price spread between local steel scrap and hot metal in East China’s Jiangsu averaged Yuan 51.5/tonne ($7.7/t), according to Mysteel’s assessment.

Moreover, during last month ferrous scrap use among the 130 mills in the sample only hosting BFs dipped accordingly by 0.75 percentage point on month to 15.23%.

Nevertheless, the trend for the remaining 57 EAF mills was different, with their scrap usage in crude steel output assessed at 96.61% or up 3.42 percentage points on month, Mysteel’s survey showed.

Written by Lindsey Liu, liulingxian@mysteel.com

Note: This article has been published in accordance with an article exchange agreement between Mysteel Global and SteelMint.