The biggest change in the Chinese scrap industry in 2018 was that the government began to focus on industry chaos, including unlicensed operations, tax evasion and pollution. It can be said that the situation of “scattered, messed up, polluting” recycling model has been controlled to some extent, and the continuous improvement of demand-side standards has also forced the recycling industry to develop towards large-scale operation. However, the development of the supply side has always been difficult to keep up with demand, and ultimately caused a certain degree of supply tension, especially on quality scrap.
According to institutional research, the current rectification of the domestic recycling industry by the government is still at the initial stage of control, and there is no extensive investigation or implementation of thorough ban measures. According to local news, the government urged relevant enterprises to apply for environmental impact assessment and land use procedures, among which processing equipment, environmental protection facilities, material handling equipment and vehicles have become basic thresholds.
In order to achieve the purpose of “full use of steel scrap and less ore”, favorable policies should be introduced for the entire scrap recycling industry. However, the current problem is that the steel scrap industry is still facing chaos of varying levels, under immature condition to implement policies from the authorities. At this stage, what can be done is to urge the industry to speed up its reform process and provide more high-quality steel scraps. Some believes that under the initial rectification, the industry is already in a tight supply state. In order to avoid excessive price hike, the rectification process may slow down but at the same time, in the current state, preparations for procedures, land, equipment, etc. are also relatively easy, and it will also gain cutting edge for the later development.
Nowadays, the pattern of long-process steelmaking in China is difficult to change. Although the short-flow steelmaking mainly based on electric arc furnace is on the rise but is still weak on the whole.
For long-process steelmaking, scrap consumption has reached its peak. Due to various restrictions, the use of scrap in blast furnaces has not been promoted nationwide, while scraps used in converters have already reached high level, at the expense of smaller size and more cleanliness, which also indicates that the price of finished scrap will continue to remain high.
In addition, although the intensity of production limit in various parts of the winter this year will weigh in on the demand for scrap steel, the supply and demand side will not see obvious change due to the tight supply and the increasing demand from electric arc furnaces. Unless there are sharp ups and downs, the scrap market is likely to maintain a state of consolidation.
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