Chinese obsolete induction furnaces are being re-located to developing countries in ASEAN region is poising a great concern for domestic industry, says SEAISI (South East Asian Institute of Steel and Iron) in one of its latest report.
In Mar’17, as a part of supply-side structural reforms for country’s steel sector, China’s central government had set the elimination target of induction furnace-based steel by 30 Jun’17.
An induction furnace steel which is also called as ground bar steel is made by melting ferrous scrap in induction furnaces. The process doesn’t allow effective control over the composition and quality of steel produced and is hence criticized for its end output of low grade long steel.
As per the market reports, country was able to meet its target and closed capacity totalling to about 120 MnT/Year of induction furnaces at more than 600 companies nationwide.
The closure of these induction furnace facilities had both good and bad impact especially on the 6 ASEAN countries that includes Indonesia, Malaysia, Thailand, Philippines, Vietnam and Singapore.
Cheap availability of ferrous scrap from China
As the key raw material for induction furnaces is ferrous scrap, the closure of induction furnaces resulted in oversupply situation of ferrous scrap in China’s domestic market. Subsequently, domestic ferrous scrap prices dropped significantly and, despite 40% export duty on ferrous scrap export, there was sudden surge in its export from China.
ASEAN countries were the main export destination for Chinese ferrous scrap and in first 10 months (Jan-Oct) of 2017, around 1 MnT from China were exported to 6 ASEAN countries. This proved to be a positive development for the steelmakers in the region (ASEAN) as majority manufacturers operated EAF (Electric arc furnace) facilities in which scrap was used as the main feed material.
ASEAN countries, preferred destination for China’s obsolete equipment
In Nov’17, SteelMint had reported of Chinese companies shipping their induction furnaces to ASEAN countries especially Indonesia. Now, as confirmed by SEAISI (South East Asia Iron and Steel Institute), three ASEAN countries that include Indonesia, Thailand and Malaysia have reported increased supply of unwanted and obsolete induction furnace equipment from China.
The main cause of concern for these countries is that the exported Chinese equipment are environmentally unfriendly, high energy consuming, and produces sub-standard steel products. Now as a preventive measure, the respective industry associations of the affected countries are pushing their governments to control and restrict the imports of such equipment from China.
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