Chinese Steel Mills Increase Scrap Consumption Significantly

Few months earlier, Chinese government has implemented stricter rules against illegal steel smelters those were using small induction furnaces owing to environmental issues. According to market sources, these furnaces used to feed scrap as raw material. Most of the scrap is used by the domestic mills and rest is getting exported.

Chinese steel mills have been considerably increasing scrap consumption over the past couple of months owing to increased supply.

According to Chinese Association of Metal Utilisation (CAMU), scrap consumption will increase to upto 130-140 MnT in 2017, against 90-100 MnT in 2016. This figure is compiled from the Major Chinese mills which contribute about 70-80% of China’s total steel production. Moreover, CAMU anticipates scrap consumption to increase upto 200 MnT by 2020.

As per one observation, various mills have increased their scrap consumption in the last few months. Several other companies are trying to increase the scrap consumption ratio during the production process. A Chinese based steel maker highlighted that we increased scrap consumption to 20% which was 5-7% earlier.

Scrap lying at one of the Chinese steel mills

Although the domestic scrap prices have started going up in the Chinese market and have recently climbed by 10-15% against past few week’s prices. The current trade prices for ferrous scrap are at Yuan 2,100-2,150/MT (USD 312-320 /MT) delivered to mills, including VAT.

However, scrap prices are lower, and more companies are trying to increase the scrap ratio in steel production.In the future, more scrap will be used by Chinese steel companies. They are likely to raise further their scrap consumption to 20-25% in the coming time.

In our recent visit with Chinese steel mills, we observed that most of the mills have increased their scrap consumption in last few months.

Chinese ferrous scrap exports skyrocketed in Jun’17 – China world’s biggest steel producer has registered surge of 151% M-o-M in its ferrous scrap exports in Jun’17. According to recently released customs data, the country exported 201,679 MT ferrous scrap in Jun’17 compared to 80,345 MT ferrous scrap in May’17.

Country-wise scrap exports from China in Jun’17 –