Asia – China’s effort to raise the amount of steel it recycles will have a growing impact on demand for raw iron ore from this year, Reuters has reported. Analysts say the development ‘threatens to worsen a worldwide supply glut, putting further pressure on global suppliers.’
China imported a record 933 million tonnes of iron ore in 2014, meeting 78.5% of its total needs. Now the country is trying to make more use of vast amounts of steel buried in landfills or encased in concrete. Analysts expect that improved collection rates could see as much as 200 million tonnes of scrap generated per annum by 2020. Mining group BHP Billiton has forecast that China’s scrap ratio will rise to around 20% by 2020 and up to 39% by 2030.
Not left on the ground
‘Iron ore demand is going to be in decline from 2017 because scrap generation will be growing faster than demand,’ according to Ian Roper, an analyst at CLSA, who points out that Chinese blast furnaces only use 8% scrap. ‘You can run that up to 20%,’ he comments. ‘It isn’t going to be left on the ground.’
Major miners such as Vale, Rio Tinto and BHP Billiton have increased production by 234 million tonnes in the last two years, driving down prices and boosting their market share in China, which accounts for roughly two-thirds of global seaborne iron ore shipments.
Collection ‘pretty low’
Huang Dao, an official with the China Iron and Steel Association, has stated that 91% of China’s steel production comes from pig iron rather than scrap, compared to around 35% in the USA. ‘China’s scrap steel collection is pretty low because looking at the life of construction materials, which last 70 years or even longer, rebar buried in cement cannot immediately return to the smelter,’ he says.
Oliver Ramsbottom, a partner at McKinsey who follows the Chinese steel market, believes that a larger reservoir of scrap will emerge this year after ‘strenuous efforts’ by the government to ‘create a structure’ for the market by setting up scrap collection and sorting facilities.