In general it is always observed that, under the premise of the same quality and similar selling price, the cost of electric furnace steelmaking is comparatively lower than that of blast furnace-converter steelmaking. The most important condition for electric furnace steelmaking depends on the economical availability of sufficient scrap and sufficient electricity and relatively cheap electricity. On the other hand, from the demand side, the major steel products produced by EAF must have sufficient market demand and have appropriate prices.
As a developed country, Japan has ample amount of steel reserves and advanced steelmaking technology. However, the proportion of Japan’s EAF has been maintained at a level of 24% in recent years.
Japan has remained a major ferrous scrap exporting nations. Why is the country not using it for EAF rather than exporting it?
Increasing trend of steel scrap in Japan: In general, the amount of waste scrap generated is proportional to the amount of iron and steel savings. Japan’s era of massive use of steel (1950-1990) came around 50 years later than that of Europe and the United States. Before the 1990s, the amount of scrap in Japan grew rapidly, with an average recovery rate of about 2.5% to 3%, indicating that Japan’s steel, which was put into use during the period of rapid economic growth, was recycled during the years of scrap formation. With sustained steel production, amount of scrap generation has also increased.
Processed scrap production and consumption: In 2011, 68% of Japan’s processed scrap was from the automotive industry, followed by industrial machinery (10%), motor (7%) and shipbuilding industries (6%) respectively which was higher than the generation in the construction industry. Therefore, although steel consumption in the Japanese construction industry is relatively large, the average production rate of processed scrap is lower than those in Europe and the United States. In general scrap production by processing automobiles is higher than that of the construction industry.
Timeline in Japanese steel industry –
1.During 1950-1965 – Crude steel production surged sharply using open-hearth steelmaking feeding a large amount of scrap steel.
2.During 1965-1975 – Open hearth method started abolishing and focus of steelmaking shifted to converter based pig iron production. The proportion of EAF steel production remained within 20% these years.
3.During 1975-1996 – Japan’s domestic scrap supply enhanced and the dependence on imported scrap decreased. Japan’s EAF plants rationalized the product structures and equipment during the oil crisis of 1973. Since then, EAF steelmaking has entered a period of rapid development, increasing its share from 17% in 1975 to a peak of 33% in 1996. The increase in the demand for scrap steel caused by the increase in output of EAF steel is offset by the decline in the ratio of converter scrap.
4.After 1996 – The proportion of EAF steel production in Japan’s started to decline, mainly due to the decline in demand for steel products from EAFs. Over the stagnation of Japan’s economy and bursting of the real estate bubble, the downturn in the construction industry has caused the demand for steel products from EAF to fall leading to decreased scrap usage.
5.Till 2009 – Under the condition of steadily increasing automotive demand and crude steel production and also the decline in the output of EAF steel have led to a continuous decline in the proportion of electric furnace steel, which fell to 21% by 2009.
6.After 2009 – Affected by the weak demand for steel products from EAF, Japan’s EAF steel ratio peaked at only about 33%, while the proportion of U.S. electric furnace steel in developed regions was as high as 50-60%, while that in the European Union was as high as 40%.
7.Present scenario – There are about 40 EAF companies in Japan, with an annual production capacity of 40 MnT while the actual output is only 20 MnT, and there is a serious overcapacity situation.
The proportion of Japan’s EAF steel output that has not reached such a high proportion as in the United States or Europe is mainly due to the following:
1. Economic stagnation and slowdown of construction after 1990’s: The decline in demand for EAF steel has affected the output growth of electric furnaces and proportion of crude steel produced through EAF. Japanese real estate and basic construction remained in a long-term downward trend moreover, with the increase of scrap prices in the recent period, Japan has shifted from net importer of scrap to net exporters’ role, and the outflow of scrap resources has made domestic resources available. The reduction, in turn, has led to an increase in the cost of steelmaking in Japan’s domestic EAF, and the output of steelmaking in EAF has not been able to grow faster.
2. Power shortages and high electricity prices: Over the lack of energy resources in Japan, the energy used is mainly dependent on imports of oil, natural gas, and coal pursuing both efficiency and economy of country driven by fluctuations in commodity prices in the international market. Japan’s main energy sources for generating electricity are atomic energy followed by oil, Natural gas, coal, and water. However, the proportion of natural gas, oil and coal used for power generation is slowly increasing.
3. Slower technological development and less market share: In Japan, converter technology is developing faster, and EAF technology is developing relatively slowly; because of the rapid development of converter technology and the improvement of labor productivity, the major share of the domestic steel market in Japan is eventually caused by blast furnaces. The long process steel plant of the converter occupies, and the converter steel plant becomes the dominant force in the market.
Input from an article published by China United Iron & Steel – Shi Wenfei
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