China's scrap steel supply in the fourth quarter of 2023 is expected to be higher than in the third quarter, mainly due to gradually increasing use by steel processors and amid government calls for the renewal of "urban villages", analysts and sources in the week until November 24.
So-called “urban villages” in China usually refer to projects built on rural land managed by large cities. The government's latest move aims to revive China's economic growth, which has been held back by a weak real estate sector. The real estate sector is the largest driver of steel demand in China.
Industry sources say there is already an increase in scrap metal supply driven by increased demolition work.
China also hinted that it is expected that more scrap steel recyclers will enter the steel recycling industry, which could improve supply flow.
China's Ministry of Industry and Information Technology said Nov. 22 that it has identified 135 new scrap steel recyclers in the country that meet quality standards, to enter the scrap metal recycling sector.
China's scrap steel production volume was 260 million tons in 2022, down 10 million tons from 2021, according to the China Iron and Steel Association. According to the data, the use of scrap steel in China's steel sector reached 210 million tons in 2022, down 16.19 million tons from 2021.
Steel scrap can be used directly in electric arc furnaces without the need for raw materials such as metallurgical coal and iron ore, which makes the EAF production process shorter and reduces emissions.
According to the China Scrap Metal Recycling Association, using one ton of steel scrap can save about 1.6 tons of iron ore .
In the long term, scrap steel use in China will rise until 2025 as the country seeks to reduce dependence on imported iron ore by using more scrap, analysts say.
Based on With the scrap steel utilization rate expected to be 30% in China's steel sector by 2025, the Metallurgical Mining Association of China (MMAC) expects scrap steel utilization to reach 330 million tons by 2025, which will produce about 330 million tons of crude steel.
For comparison, according to the China Scrap Metal Recycling Association, the scrap steel utilization rate in China's steel sector was 10% in 2015, and rose to 18.88% in 2020.
Assuming stable domestic iron production, China could use 100-150 million tons more scrap steel to replace about 200 million tons of iron ore by 2025, MMAC analysts say. This could lead to a reduction in iron ore imports of 160-240 million tonnes by 2025, they added.
