MYSTEEL: China ferrous scrap prices to stay on downtrend in '24

During 2023, the country's ferrous scrap prices moved within a relatively narrow range compared with the previous few years, with Mysteel's national steel scrap price index averaging Yuan 3,029/tonne ($426.5/t) including the 13% VAT, lower by a significant 10.4% from the average price in 2022.

This year, the scrap prices may drop further by 5% on year overall, the report estimates. Downstream steel consumption in China can hardly rebound under the impact of the gloomy performance of the country's property market, so domestic steel production will inevitably decrease, it explains. As such, Chinese prices of steelmaking raw materials, including not only steel scrap but also iron ore and coke, will generally weaken this year, according to the report.

However, steel scrap demand from domestic steelmakers may not decline this year because more newly constructed electric-arc-furnaces (EAFs) will be put into operations, the report shows.

China's ferrous scrap utilization should reach 450 million tonnes/year by 2025, as proposed in a carbon reduction instruction released by the country's National Development and Reform Commission in February last year, and this will boost domestic EAF production in the coming years.

The total EAF-routed production capacity for crude steel in China expanded by 11.1 million t/y from 2022 to reach 220 million t/y in 2023, Mysteel's survey showed. For this year, another 9.5 million t/y of EAF capacity is scheduled to commence production, according to Mysteel's tracking.

In the meantime, blast-furnace (BF) mills are also expected to lift their scrap use in production as they have been required by authorities to reduce pollutant emissions in steelmaking process, Mysteel Global noted.

Chinese steelmakers consumed some 248.6 million tonnes of steel scrap in total last year, and the volume is likely to grow by 5 million tonnes or 2% on year to reach 254 million tonnes in 2024, according to Mysteel's assessment.

On the other hand, ferrous scrap supply in China is expected to rise in 2024 as well, the report forecasts, citing that the scrap resources will increase along with the progress of industrialization across the country.

The capacity of steel scrap collecting and processing among domestic companies is also growing under the guidance of the government, Mysteel Global noted. As of November last year, a total of 825 scrap dealers and recyclers have been approved by China's Ministry of Industry and Information Technology (MIIT) as qualified scrap suppliers, as reported, and the number may continue to increase this year.

In 2023, steel scrap supply in China totalled some 249 million tonnes, according to Mysteel's survey, and it is expected to grow to 254 million tonnes this year, roughly the same level as the estimated scrap consumption. Therefore, China's ferrous scrap supply and demand will reach a narrow equilibrium this year, it concludes.

Written by Anthea Shi, shihui@mysteel.com

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