During the Alacero Congress in Cancun, Mexico this week, several presenters stated their expectation that China’s up and coming scrap supply will both provide an opportunity and a challenge for the global steel market. Paul Butterworth from CRU, Peter Marcus from World Steel Dynamics, and Richard Oppelt from Accenture Strategy all agreed that China’s scrap capacity will be increasing dramatically by 2022-2025, although, not all were in agreement on whether China would become a net scrap exporter. The increase in scrap is expected as a result of increased steel consumption 20-25 years prior and China’s policy incentivizing people to recycle as part of their environmental initiatives.
According to Oppelt and Marcus, while the long position in scrap will drive some firms to convert blast furnace production to EAFs, China will nevertheless become a net scrap exporter due to oversupply. While Oppelt believes the level of scrap export could be potentially smaller, Marcus expressed his belief that a drastic move toward EAF technology by Chinese firms is unlikely due to extremely high energy costs, therefore, a significant supply of Chinese scrap in the export market will likely place downward pressure on scrap prices. Marcus stated that 70 million mt of scrap supply at the moment will grow to 350 million mt by 2025.
Buttersworth, on the other hand, differed with the expectation that China will become a net scrap exporter and expressed strong support in CRU’s research that China will absorb its scrap supply through vast adoption of EAF technology.