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China eyeing restart of ferrous scrap imports in H1 2021, says trade
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China eyeing restart of ferrous scrap imports in H1 2021, says trade

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China eyeing restart of ferrous scrap imports in H1 2021, says trade

Update:2020-11-06   View(s):38   Keywords :China eyeing restart of ferrous scrap imports in H1 2021, says trade

China is likely to allow the resumption of ferrous scrap imports from early 2021, or at least no later than June, market sources close to the issue said Oct. 27.

 

Chinese authorities banned such imports in July 2019 due to environmental concerns, but have been pushing for a resumption with stricter controls since May, deeming scrap a recyclable resource that will reduce polluting emissions during the steelmaking process and align with efforts to decarbonize the economy.

 

Some industry sources are also calling for scrap imports to resume because steelmakers are grappling with tight domestic scrap supply as the countrys steelmaking capacity increases.

 

But even with scrap imports, the total volume of scrap available is expected to be insufficient to reduce Chinas steelmaking costs as its capacity continues to grow.

 

S&P Global Platts estimates that Chinas overall crude steel capacity comprising converters and electric arc furnaces, or EAFs will reach 1,257 million mt/year by end 2020 and 1,281 million mt/year by end 2021, up from 1,243 million mt/year at end 2019.

 

EAF steelmaking capacity will reach 184 million mt/year by end 2020 and 197 million mt/year by end 2021, up from 175 million mt/year at end 2019, Platts estimates. Most of the new EAFs will be located in Sichuan, Fujian and Guangdong provinces.

 

The scrap ratio in Chinese converters can be boosted to as high as 20%-30% in a bid to maximize steel production when steel margins are good, while EAFs consume mainly scrap. The scrap usage in converters surveyed by Platts in Q3 averaged 14%, down from 16% in Q2.

 

Sources said Chinese domestic scrap was currently around Yuan 400/mt ($60/mt) higher than overseas material with freight costs and taxes included. But once China starts to import, overseas prices were expected to increase rapidly, making the arbitrage opportunity short-lived, they said.