China’s scrap utilization rate in its domestic steel production, which is around 20 percent, is very low compared to the prevailing level in the international market. For instance, in 2022, scrap utilization rates were above 80 percent in Turkey, around 70 percent in the US, 55.5 percent in the EU and 34-35 percent in Japan, as stated by Li Shubin, secretary of the Party Branch and director of the expert committee of China Association of Metalscrap Utilization (CAMU). In 2022, China consumed 215.31 million mt of scrap, decreasing by 10.9 million mt or 4.8 percent year on year, while its crude steel output reached 1.01795 billion mt in the given year, down 1.7 percent year on year. At the same time, in 2022, total steel scrap supply generated in China amounted to 260 million mt, decreasing by 10 million mt year on year.
In 2022, demand for steel in China slackened, dragging down steel prices and resulting in big fluctuations in steel scrap prices. For instance, average scrap prices for the year were at RMB 3,310/mt, with a peak level of RMB 3,900/mt and the lowest level of RMB 2,750/mt. Meanwhile, the Covid-19 pandemic exerted a negative impact on the scrap market, including causing stoppages on high-speed roads, difficulties in the operation of factories, and creating a difficult situation in upstream and downstream channels in the given year. Moreover, the government tax policy, though issued in 2021, was still hard to implement and also negatively affected the scrap market.
In order to improve the situation in the raw material market, China issued a cornerstone plan in 2022, aiming to strengthen supply by accelerating the development of new iron ore mines, promoting new overseas iron ore equity mines and enhancing the utilization and development of scrap supply.
According to Li Shubin, China will do everything possible to increase the use of recycled steel. “Whoever seizes the opportunity to utilize quality recycled steel will catch the development trend of the future,” he said.
Scrap consumption in China is expected to reach 300 million mt, 350 million mt and 400 million mt in 2025, 2030 and 2035, while by 2035, China’s crude steel output is expected to decrease to 800-900 million mt, signaling that utilization of scrap will inevitably increase sharply.
Currently, China’s Dalian Commodity Exchange (DCE) is working on preparations for the listing of ferrous scrap.