China’s leading steel market Intelligence Company MySteel held the conference on April 1 at Shangri-la hotel, aiming to provide a platform for industry participants to exchange views and get hands-on information from experts. The event was supported by CAMU. CAMU represented by Mr. Shubin the Secretary-General, had shed light by delivering a speech themed “brief analysis on Chinese scrap utilization in 2018 and prediction, the outlook for the industry in 2019 and last two years of the 13th five years plan.”
Key Takeaways are as follow:
What happened in 2018 in Chinese scrap market?
1. Scrap consumption & utilization rate hit record high – In 2018, China’s total consumption of scrap and comprehensive utilization had hit record high. The scrap consumption totaled 188 MnT, Y-o-Y increase of around 40 MnT. Scrap consumption per unit steel was 202.3kg/t, up 13.8% Y-o-Y. BOF saw scrap consumption per unit of steel at 152kg/t, up 23.8kg/t, or 18.6% Y-o-Y. EAF saw unit consumption of scrap at 662.8kg/t, up 2.2kg/t or 0.3% Y-o-Y; the scrap utilization rate reached 20.2% out of total output of crude steel, up 2.45% Y-o-Y; EAF steel output took up 9.8% of total crude output, up 0.5%.
2. Upswing in scrap generation volume – In 2018, the total generation of scrap was 220 MnT, up 20 MnT yoy or 10%. Specifically, scrap generated from steel mills was 50 MnT, occupying 23% share in total generation while procurement from social channel was 170 MnT, taking up 77% of the total.
3. Sharp fall in both imports and exports of steel scrap – In 2018, China imported scrap 1.34 MnT, down 980,000 MT Y-o-Y and exported 332,000 MT, down 1.871 MnT Y-o-Y.
4. Fluctuation in scrap prices – In 2018, scrap price had been in fluctuation amid fluctuation in finish steel prices in domestic market and Sino-We trade friction. In 2018 the average scrap price was RMB 2,349/MT, while rebar average was RMB 4,244.83/MT, with the price difference in between standing at an average of RMB 1895.83/MT.
How Chinese Scrap market likely to change in 2019?
1. Increase scrap usage – Scrap flow of consumption turns new outlook as resumption of EAF and new capacity will lead to increased scrap usage; presently, the hot metal is comparatively more economical resulting in less usage by long route mills; if profits go up, EAF mills may increase usage together with long route mills however, It is estimated that the EAF capacity utilization rate will be lower than last year’s 67.6%.
By 2020, the recycling and utilization volume of scrap should reach 150 MnT. By 2025, the scrap ration in total steel output should reach 30%. By 2030, scrap utilization rate is hopefully to exceed global average.
2. Adding EAF capacities – The EAF capacity in 2018 was 131 MnT and the estimates of added capacity in 2019 are 15 MnT.
3. Scrap prices may rebound in H1 CY19 – Experts predict that in the first half of 2019 the scrap price is going to rebound though it is experiencing downward pressure at present.
4. The finished steel price is likely to lower than that of 2018. With shrinking of profits of steel mills, the proportion of scrap usage by BF will decrease and the price will fluctuate between RMB 1,600-2,400/MT due to the transition of scrap supply from tightly balance to balanced state.
5. Scrap industry to remain supported on tightening environmental norms – From the perspective of tightening environmental inspection and green development concept, as well as the introduction of carbon emission trading system, scrap industry got more leverage for development. CAMU will help the industry to develop EAF route.
Improve the scrap quality to lay a foundation for quality development, through improvement in scrap processing and complying national standard. To push for integrated scrap processing and utilization by elevating the threshold and requirement of management level. Establish a system of processing and delivery.
6. Sharp hike in iron ore prices a concern – Long route mills are worried about upswing of ore price and have the need for scrap usage. In 2019, the situation of oversea scrap price being cheaper than that in Chinese market will change. On policy side, the import of scrap in 2019 will face greater pressure. The sustainable days of scrap inventory at mills is turning down.
7. Crude steel output to fall, scrap availability to increase – Scrap resources are on the rise at a speed of 10 MnT increase per year while crude steel output will go down. Steel mills are more willing to use scraps and the proportion of scrap utilization will go up.
8. The proportion of short route steelmaking will go up, with the usage rate of scrap by EAF and ratio of EAF steel out of total steel increasing.
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