Pent Up Demand from New EAFs Spurs Chinese Steel Scrap Consumption

SEATTLE (Scrap Monster): According to forecasts, the Chinese steel scrap use is expected to rise significantly over the forthcoming years. This is on account of the projected surge in demand for scrap from new electric arc furnaces (EAFs) in the country.

According to China’s Ministry of Industry and Information Technology (MIIT) estimates, scrap use is likely to exceed 200 million tonnes by 2020. It forecasts scrap use to witness significant year-on-year jump to total around 190 million tonnes to 200 million tonnes in 2018. However, forecasts by other agencies project 10% surge in scrap use by the country to 220 million tonnes in 2018.

The Chinese mills have been holding to or reducing scrap ratios. The drastic fall in steel prices has led to huge compression of margins. Consequently, scrap ratios have dropped sharply from 25% to as low as 15%. The lack of production restrictions too have resulted in huge drop in scrap ratios. The 2.4% rise in Chinese pig iron output during Jan-Nov ’18 indicates that blast furnace activity remained robust during this period. It must be noted that Chinese crude steel production surged higher by 6.7% in the first eleven months of the year.

The recent forecast by Goldman Sachs suggests that the country’s EAF steel output is likely to total around 87 million tonnes in 2020, accounting for 12% of the total steel output. This is significantly higher when compared with the output of 53 million tonnes or 6% of the total output in 2017.

This story originally appeared in www.argusmedia.com