Steel scrap consumption in China has surged exponentially by 46.1% within the first two quarters of 2017 to 62.24 million tonnes (mnt). Whereas the total steel scrap consumed during 2016 was 90.1 mnt. Figures released by China Association of Metalscrap Utilization (CAMU) reveals that steel producers have increased scrap feed from 111kg per tonnes to 148.2 kg per tonne during the first two quarters of 2017.
As it may be recalled, the Chinese government’s crackdown on obsolete induction furnaces had led to a sudden surge in scrap availability in the last 6 months which in turn led to increase in scrap feed by steel producers and commencement of scrap exports from China. According to data maintained with SteelMint imports of steel scrap in China also declined significantly over this period making China a net exporter of the vital steel making raw-material.
With surge in production of crude steel in China prices of scrap have also risen steeply. The average price of steel scrap during Q4 of 2016 was around USD 263 per tonne while the price reported in April was around USD 301 per tonne. The deviation seems even more steep when compared with prices prevailing during December 2015 which were about USD 169 per tonne.
Future outlook
While speaking to SteelMint, on the sidelines of 17th China International Steel & Raw Materials Conference, representatives of CAMU expressed strong belief that with supply side reforms and capacity reduction the steel and steel scrap companies in China have a great opportunity in the coming five years. According to them steel scrap price may remain volatile in the short term but there is little possibility of a sudden correction as seen in 2015.
They further asserted that the 40 per cent duty imposed on export of scrap from China has not been removed in their knowledge and therefore it remains apparent that the scrap export from China are temporary. CAMU claims that the strong implementation of environment protection laws and establishment of nationwide carbon emission trade system has created favorable condition for development of scrap industry.
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