In contradiction to earlier interpretations of the Chinese Government’s notification for altering export duties on several steel products and ferrous scrap, the Chinese customs has clarified that the export duty for scrap has been kept unchanged at 40%.
The Chinese government on December 15 had announced that it was either changing or removing export duty on certain steel products owing to drastic changes in international trade environment. The announcement came as a surprise to industry observers, leaving most of them in ambiguity over precise changes in the duty structure. Even trade participants based in China continued to interpret the notification issued by the Chinese government over the weekend from different point of views. However it was only by Monday that clarity prevailed in markets after Chinese customs eased the nerves of a tensed domestic steel industry by stating that duty for scrap would remain unchanged.
The Chinese government has made it clear that authorities are making relentless efforts to increase domestic scrap consumption and a reduction in duties may prove to be counterproductive in-line with the country’s long term objective.
According to sources China is expected to produce between 200 to 300 million tonnes (Mnt) of scrap by 2025, as the country’s obsolete scrap generation has been witnessing a steep rise and this trend is likely to continue over the next couple of years. Going by the present growth rates, the total scrap generation in China would likely go up to around 320-350 Mnt by 2030.
The government is working expeditiously to replace obsolete induction furnaces that had been shut down in the beginning of 2017, with new Electric Arc Furnaces.
In 2016 China’s Electric Arc Furnace ration was 7.3% and within a year it has gone up to 10% of total steel production. China had closed down obsolete induction furnaces with more than 140 Mnt production capacities. But these have already been replaced by 30 Mnt of EAF capacity in 2017 and another 20 to 30 Mnt EAF capacity would be added by 2018. This would bridge more than 50% of the gap created in scrap consumption. On the other hand larger induction furnaces have already doubled their scrap feed.
Even in 2016 out of the total 160 Mnt of scrap that was being generated about 90.10 Mnt was being consumed by large steel manufacturers while casting mills were consuming 10 Mnt of scrap. This would leave between 60 to 70 Mnt scrap for induction furnaces. It was this 60 Mnt scrap which had led to a sudden scrap surge but now a bulk of it is being consumed by EAFs.
Leave a Reply