Following the expected announcement of the China Ministry of Ecology and Environment, which officially allowed imports of scrap as a recycled steel raw material from January 1, a number of deals for imported scrap have been reported in China.
A contract for 3,000 mt of imported heavy scrap from major Japanese trading firm Mitsui has been done recently. The material is expected to be shipped to Shanghai Port and will be consumed by Baowu Steel, as confirmed by Ouyeel, the company that signed the purchase contract. Ouyeel is an online steel transaction platform established by Shanghai-based China Baowu Steel Group.
Another deal for almost the same volume has been done by another Japanese trading company. Market sources reported that both contracts are for HS scrap, which is similar to P&S in the international classification. The final prices in contracts have not been disclosed by the time of publication. “The price is not so important at this stage,” one trading source commented to SteelOrbis, adding that these bookings are important as the first trial shipments after the long break to see how the new import system will work. The latest details about the quality of the import scrap under new standards were published by the China Metallurgical Information and Standardization Institute on December 21, as SteelOrbis reported earlier.
The latest tradable price level for ex-Japan HS scrap was at $480/mt CFR or above in Vietnam last week. The deal price level to China is not specified, but the price has been heard at $490-495/mt CFR, according to market sources. It is expected that Chinese customers will be interested mainly in higher grade scrap from Japan like HS, shredded and shindachi (equivalent to busheling).
Though it is expected that, after China lifted the ban on import scrap, the annual import volumes may reach up to 10 million mt, in the first months of 2021 the trading will be cautious. In addition, at the moment, ex-Japan scrap prices are higher than local prices, and so demand may be lower than expected at first. Before the ban, the main import scrap suppliers to China were Japan and the US.
According to the announcement of the China Ministry of Ecology and Environment Scrap on December 31, scrap under HS codes 7204100010, 7204210010, 7204290010, 7204410010 and 7204490030 is classified as recycled steel raw material and is not subject to an import ban. Together with the implementation of the new standards, China has changed the duty system. And starting from January 1, the new most favored nation (MFN) duty rate is zero for the items under customs tariff numbers 72042100, 72042900, 72044900 - stainless steel scrap, shredded scrap of other alloy steel and other shredded steel scrap. The MFN duty rate is two percent for the items under 72041000 and 72044100, which are cast iron shredded scrap and scrap from machining.