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FEATURE: CAMU calls for re-opening scrap import routes

The China Association of Metalscrap Utilization (CAMU) is continuing to press the central government in Beijing to open steel scrap import channels and introduce policies to free up imports of steel scrap, saying this should be done considering the economic and environmental benefits, according to association vice president, Li Shubin.
As part of its campaign, CAMU has been working with the China Metallurgical Information and Standardization Institute to draft new standards for imported scrap steel in an effort to win the government’s approval for recommencing steel scrap imports, Mysteel Global understands. Such a change would have significant ramifications for China’s scrap trading and steel production sectors so it’s perhaps not surprising that CAMU is not saying when it hopes the new standards would be submitted to the central government for consideration.

For several years, Beijing has been making efforts to restrict what it calls “foreign garbage” from flowing into the country and has been tightening solid waste material imports since the end-2016. Last July as part of the government’s moves to encourage increased use of domestically sourced scrap and to boost the development of local recycling systems, China began to officially limit the import of steel scrap.

Consequently, in the second half of 2019, China only imported 28,600 tonnes of steel scrap in total, recording a sharp decline of 81.62% from the first half of the year, Mysteel Global noted.  According to CAMU, the restrictions currently in place on steel scrap imports are aggravating the imbalance between domestic steel scrap supply and demand, which propels domestic steel scrap prices to high levels, and weighs on steel scrap-consuming enterprises’ raw materials costs.

CAMU argues that a new policy should be implemented by the central government to encourage the import of high-quality scrap steel that will have no detrimental impact on the environment, in line with Ministry of Ecology and Environment directives. Detailed, strict and seamless new standards should be formulated for foreign scrap imports, according to CAMU officials quoted recently by China Metallurgical News (CMN), regarded as the official media of the China Iron & Steel Association.

New categories, new terms

In the new standards CAMU is drafting, the association wants the term "steel scrap" replaced by the term "recycling steel materials" to avoid the import of scrap materials that are unsorted and ungraded.

CAMU also suggests that these imports can be divided into categories such as high-quality structural steel scrap, ordinary structural steel scrap, railway steel scrap, packaging steel materials (coated and non-coated) and crushed steel materials.

Such appeals from CAMU are among the efforts the association is making to encourage the whole domestic steel-industry chain resume to normal business as soon as possible, now that the threat of major social disruption caused by the spread of COVID-19 nationwide has eased, Mysteel Global notes.

Wang Fangjie, CAMU’s vice general secretory mentioned that currently, many domestic steel enterprises are experiencing steel scrap shortages caused by the outbreak of the virus in late January, especially electric-arc-furnace (EAF) steel enterprises, many of which remain closed, he told CMN.

The outbreak of virus had largely delayed most steel scrap collectors and processers from quickly resuming operations after the Chinese New Year holiday, Mysteel Global noted. According to a CAMU survey conducted among 370 steel scrap collectors and processers nationwide, as of March 13, some 72% had recommenced operations. This was higher than the previous week’s 42% but is still lower than the overall operating rate among many steelmakers, CAMU noted.

Wang admitted that the period of time between the formulation of new import standards (and their ratification by government and industry) to the final realization of increased steel scrap imports will be long. Drafting standards for import and export generally needs more than 2.5 years – and 1.5 years at the very least – and after the release of the standards, the details also need to be communicated to China’s Customs administration and other departments to coordinate tariff codes. As a result, the process of resuming steel scrap imports could take three-five years, he admitted to CMN. 

However, he mentioned that if this process can be accelerated, it will greatly assist Chinese steel enterprises to reduce their costs and increase profit margins, especially in the present situation in the domestic scrap sector where generating, collecting and processing of scrap remains insufficient to meet the needs of steelmakers.

Raw mats prices remain the focus

Also, qualified steel scrap materials meeting agreed standards are an alternative to iron ore in steelmaking but in recent years in China, international steel scrap prices have been lower than prices of domestic steel scrap (of inconsistent quality), market insiders note, while at the same time prices of imported iron ore have been lingering at relatively high levels over the same time.

Over the 15 months from January 1 2019 through till March 24 this year, Mysteel’s carbon steel scrap price index has been persistently fluctuating between Yuan 2,453 and 2,647/tonne ($347.4-374.8/t) including the 13% VAT (VAT was 16% before April 1 2019). Significantly, throughout the period the lowest point was actually on March 24, as prices had declined steadily after the Chinese New Year holiday ended February 2 before crashing last week under the weight of the COVID-19 outbreak and realization that the global economy is approaching recession.

However, over the same period, Mysteel’s PORTDEX 62% Fe Australian iron ore fines index grew from Yuan 558/wmt to Yuan 913/wmt CFR Qingdao and including 13% VAT (VAT was 16% before April 1 2019). As of March 24, the index was at Yuan 649/wmt, still higher than Yuan 558/wmt on January 1 2019.

Nevertheless, market sources canvassed by Mysteel Global were largely indifferent to CAMU’s campaign. “We can still see it will take a lot of time for the government to finally approve a policy to free up steel scrap imports, so it will make no difference for the foreseeable future,” a steel scrap collector in East China’s Anhui province commented.

Written by Victoria Zou, zyongjia@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com