Panellists at SGX’s Singapore International Ferrous Week conference this week were unanimous that Chinese import volumes of steel scrap will keep rising in the future. Where they were divided was how quickly foreign scrap might play a big role in the country’s scrap supply.
“China’s imported steel scrap will not see any significant increase this year, but I anticipate that the import volume will be large by the second half of 2022,” said Jiak Lim, senior trader of Zhejiang Metals and Materials Company, at the conference.
China’s push for carbon-neutrality and ‘high-quality” development over the 14th Five-Year Plan (2021-2025) will boost the country’s demand for steel scrap, Lim told delegates on July 14, adding that China’s potential and market size are both huge.
In January China’s Ministry of Industry and Information Technology (MIIT) drafted guidelines for the “high-quality” development of the domestic steel industry and for progressing the Chinese steel sector in an eco-friendly and sustainable way, as Mysteel Global reported. According to the draft guidelines, China should increase the share of steel output produced by electric-arc-furnaces (EAFs) to over 15% of the country’s total output or 20% at the best. Also, by 2025, ferrous scrap should provide 30% of the Fe units in all steel that China produces.
Over the past few years, EAFs have supplied only about 10% of China’s total steel production while steel scrap utilization amounted to about 20% of the total produced, Mysteel Global noted.
At the SGX event however, Christina Peng, an attorney with Deheng Law offices, argued that it is still early to estimate when imported steel scrap will become a major force in China’s scrap supply dynamic.
“When this might happen depends on China’s policy. The guidelines are still at the draft stage and subject to ongoing discussions,” she told delegates. The guidelines released earlier this year illustrated MIIT’s intention and attitude to promote green development in the steel industry, according to her, and to promote demand for high-quality steel scrap for steelmaking.
Since China reopened its door to scrap imports on January 1, most foreign scrap materials entering the country have been higher-grade such as heavy scrap (HS) grade. These are now in short supply and thus, more expensive.
On the other hand, imports of cheaper and more common lower-grade scrap materials such as HMS (80:20) run the risk of being regarded by Customs offices as “foreign garbage” and are refused clearance, with the result that such grades are generally not shipped to China currently, Mysteel Global notes.
Though Chinese scrap buyers have become more familiar with the Customs’ procedures for clearing scrap cargoes, the clearance requirements are still too strict, Peng said. And the Chinese government will not relax its standards requirements of inspections for importing lower-grade steel scrap in the near term, she predicted.
According to data released by China’s Customs, over January-May this year China’s steel scrap imports totalled 246,380 tonnes, as against 7,394 tonnes a year ago when China’s steel scrap imports were under quota and licensing controls, Mysteel Global notes.
Written by Lindsey Liu, liulingxian@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research.
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