Escalated Steel Scrap Supply Ratifies Switch to EAF Steelmaking

SEATTLE (Scrap Monster): The increased availability of domestic steel scrap favors China to switch to electric arc furnace (EAF) steelmaking. However, the country is likely to take more time to make a complete switch from blast oxygen furnaces (BOFs), which uses iron ore as the raw material for steelmaking. The above view was expressed by Frank Zhong, Chief Representative, Beijing Office/Advisor on Economics, Raw Materials and Markets, worldsteel during a presentation held during the Metal Bulletin’s iron ore conference held last month in Beijing.

According to data, BOF technology accounts for nearly 93.5% of Chinese steel production. The country has been the largest importer of iron ore since 2013. The imports of the steelmaking raw material had touched new high of 1,075 Million tonnes (Mt) during the previous year.

Over the past ten years, the country has been importing approximately 2 Mt of steel scrap every year. Also, the domestic scrap generated by China has been negligible over the period. However, in 2017, the country created history by exporting 2.3 Mt of steel scrap. The increased availability of domestic steel scrap suddenly has triggered a debate whether the country should make a shift to EAF furnaces.

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Meantime, the domestic steel scrap is still in short supply. The sharp surge in exports during the previous year was mainly on account of shut down of a large number of induction furnaces. Incidentally, the country’s steel scrap availability is projected to witness rapid growth to approximately 220 Mt in 2020 and 305 Mt in 2030. The projection implies that the country may likely increase its share of EAF steelmaking capacity during the forthcoming years.

The abundant electric supply coupled with higher environmental taxes on BOFs on account of stricter environmental regulations may lead to replacement of BOFs with EAFs. However, the huge investment required for the BOF to EAF conversion may deter many steelmakers. Moreover, many of the BOFs, being built over the past 10-15 years, are still operating at high efficiency levels.