Chinese ferrous scrap demand ‘grossly underestimated’

China – China’s foundry sector will boost the country’s ferrous scrap consumption over the next decade, according to a new report, ‘A strategic five year outlook to the global ferrous scrap industry’, from Metal Bulletin Research.

The report highlights the size, growth and important role of the foundry sector worldwide, and claims that previous studies have often overlooked this part of the market. One consequence is that Chinese ferrous scrap demand has been ‘grossly underestimated’, Metal Bulletin Research says.

Its analysis focuses in particular on trends in the obsolete, prompt and revert (home) scrap market, and how this interacts with the pig iron and direct reduced iron/hot briquetted iron sectors.

‘We expect the demand for scrap in China to increase by 7% per year on average out to 2021, at a time when the world’s scrap supply will dramatically increase – reaching well over 2 billion tonnes,’ the report states. The lion’s share of supply will come from obsolete scrap, arising from substantial manufacturing growth over the past decade, it adds.

China’s transition

China’s foundry sector will be a major driver of the global scrap market through to 2021. However, increased domestic consumption of scrap and government policy will delay the country’s transition from being an importer to a net exporter of ferrous scrap. ‘The consensus among many observers is that China will become a net exporter of scrap after 2020,’ says Metal Bulletin Research.

But the authorities in Beijing, for example, are currently working to discourage scrap exports and instead divert material towards feeding the growing Chinese steel industry, even if this is set to grow more slowly in future than in the recent past, the report notes.

It predicts that Chinese infrastructure investment will continue to fuel steel consumption and require the building of new steelmaking capacity. Meanwhile, the construction sector will remain the biggest consumer of long product steel. ‘The rapid increase in ferrous scrap availability within China combined with the development of EAFs give it a strategic opportunity to address its dependence on seaborne iron ore imports,’ the report suggests.

Scrap shortages

In contrast to China, the main issue in the USA over the next five to 10 years will be the risk of shortages of high-quality prompt industrial scrap. ‘While the USA’s scrap consumption is expected to increase from 72.7 million tonnes in 2012 to 75.6 million tonnes in 2021, the country’s available supplies of prompt scrap are expected to increase by only 1.6 million tonnes between 2012 (15.2 million tonnes) and 2021 (16.8 million tonnes),’ Metal Bulletin Research contends.

For more information, visit: www.metalbulletinresearch.com