In a recent interview of the top executives of “China Association of Metal Scrap Utilization (CAMU)” China, it was announced that the organization is calling for softening the regulations on steel scrap import to the country in the long-term benefit of the economy as well as the environment.
As per reports, a new standard for steel scrap import is being drafted in order to get an approval, and CAMU is joining hands with China Metallurgical Information and Standardization Institute (MIS) for the same.
In the said interview, CAMU clarified that in the proposal of opening up import of scrap to China, only the environment friendly, high quality and non-harmful steel scrap will be allowed to be imported, and not just any grade of ferrous scrap, keeping in mind the guidelines of the Ministry of ecology and environment.
In a detailed new standard being drafted for the proposal, it is reported that steel scrap will henceforth be renamed as recycling steel materials, so that the lower grade scrap are filtered out automatically. Additionally, the domestic standard of scrap import will make way for a new categorization which will better match with international standards and include categories such as – excellent structural steel scrap, general structural scrap, rail scrap, shredded material etc.
Out of the total ferrous scrap consumption of around 240 MnT per year in steelmaking, China’s total scrap imports may eventually peak at around 14 MnT per year in the coming years, thus indicating that scrap imports will form only a very small proportion in Chinese steel industry’s scrap consumption.
It is to be noted that last year in a regulation by Ministry of ecology and environment, from Jul’19 onwards, 8 types of solid waste including scraps of steel, copper, aluminum etc. were classified into the “list of solid waste usable as raw material that are restricted for import” from earlier “list of solid waste usable as raw material without restriction for import”. The impact of the decision for significant on the industry, with the country’s steel scrap imports dropping by 81.62% in H2’19 to just 28,600 MT of imports, against H1’19 import volume.
The scrap import restrictions had a negative impact on several steelmakers, as even though China’s domestic scrap production is sufficiently high, however, the supply chain inequality and different distances for different markets led to price mismatch and ultimately resulted in driving the prices up, while the opening up of scrap imports are expected to bring the raw material prices down and smoothen the market.
Over the years, overseas scrap prices have been significantly cheaper than Chinese domestic scrap, while Chinese Iron ore have been cheaper than international market. Thus under the current scenario, domestic scrap prices are expensive while cheaper overseas scrap is restricted, thus a heavy dependence on overseas Iron ore.
During the recent covid-19 outbreak, many EAF steelmakers witnessed shortage of scrap material and are still shut down due to low raw material inventory. However, the process ahead is a long one and it may take up to 3-5 years before the scrap imports are finally allowed including the coordination with Customs and associated departments for HS codes. The period for new standard’s formulation is alone expected to take at least 1.5 years.
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