Hangzhou CIEC Group: China’s scrap imports to rise by 15-25 million mt in 2021

Thursday, 22 April 2021 15:48:05 (GMT+3)   |   Istanbul

SteelOrbis talked to Hüseyin Ocakçı, Middle East general manager of Hangzhou CIEC Group Co. Ltd regarding latest developments in Chinese steel markets.

We understand China is no longer seeking to increase its domestic steel output. What is your prediction for China’s overall steel production this year compared to 2020?

In 2020, China's crude steel output amounted to 1.05 billion metric tons, and in 2021 it is expected to be 1.03 billion metric tons, a decrease of 20 million metric tons.

As the Chinese economy is growing with a focus on domestic consumption, what do you expect for China’s steel consumption and import needs in 2021? What products (semi-finished or finished steel) could be of greater interest to Chinese importers this year?

Semi-finished products will be of interest, especially billet, and scrap. As a result of reduced crude steel production, billet production will be directly affected and imports of semi-finished will be required to fill the supply gap.

With China actively importing scrap since January this year, what kind of a reaction have you observed from the global scrap market and suppliers? Which countries have already stepped in as exporters of scrap to China?

The global scrap market has been watching the market trend since the first scrap imports into China. Suppliers are comparing the market prices, trying to find out if a better price can be achieved. Due to China's customs policy, only HS steel scrap can be cleared at present, while most overseas supplies are for HMS I/II 80:20. What we have heard is that the main imports of scrap are from Japan and South Korea.

China is expected to gradually increase scrap imports as the country shifts towards EAF-based steelmaking. What is your forecast for China’s total scrap import volume in 2021?

In 2020, China imported 27,000 metric tons of steel scrap steel, while it is expected to increase its import volume by 15-25 million tons in 2021.

For now, China is importing mainly P&S scrap, while HMS I/II 80:20 is one of the major benchmarks for the global market. How do you view the influence of China’s import activity on the scrap market trend in other parts of the world?

If China’s import policy does not change, it will not have a huge impact. However, with subsequent policy liberalization, it is bound to drive up global scrap prices and depress iron ore prices eventually.

There are reports that China is seeking to change its export tax rebate system. What is your expectation?

The latest news is that the tax rebate rate for primary steel products such as hot rolling, pickling, medium and heavy plate, and screw threads will be adjusted from 13 percent to zero, while the tax rebate rate for high value-added products such as cold rolling and galvanizing will be adjusted to four percent.

How do you think prices both inside and outside China will react to a change in the tax rebate on steel exports? What will a reduction or total removal of the export tax rebates mean for China’s steel exports?

First of all, it may dampen Chinese steel exports in the short term and push up global steel prices in the long term (which is already happening). For China itself, the expectation of such a change is already materializing and steel exports will definitely be reduced in line with the government’s principle of capacity reduction (China’s steel exports may be reduced by around 20-30 million metric tons).

Considering that iron ore prices hit a nine-year high in 2020, what are your predictions regarding iron ore supply and prices in 2021?

With the implementation of the various policies in China, iron ore usage will decline gradually, while the price of iron ore is expected to be at $100 by the end of 2021.

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