China ferrous scrap usage surged in 2019

The 28.1mn t rise in Chinese ferrous scrap consumption outpaced an 8.3pc rise in the country's crude steel production to 996.3mn t.

The main driver for the increase was higher pollutant emission standards for the Chinese steel industry, which caused most of the country's basic oxygen furnace (BOF) mills to increase their scrap inputs, BIR said.

The current average steel scrap/crude steel ratio in Chinese BOF mills was estimated by BIR to be 20.2pc.

Higher BOF usage offset a slight fall in China's electric arc furnace (EAF) crude steel output in 2019. Chinese EAF production fell by 14.5pc to 103.2mn t after more than doubling from 54mn t to 120.7mn t between 2017 and 2019.

The EAF share of total Chinese crude steel production decreased to 10.4pc against 89.6pc for BOFs from 13pc against 87pc in 2018.

China's EAFs lost market share against BOF mills in 2019 as high scrap prices caused by tight availability meant EAF steelmakers' margins came under heavy pressure as domestic rebar prices weakened. This resulted in EAF utilisation rates falling throughout 2019.

The longer term rise in EAF production over the past five years, along with the increased scrap utilisation by BOF mills has driven Chinese ferrous scrap consumption up by 159pc, or 132.6mn t, since 2015. Chinese crude steel production only increased by 19.3pc over the same period.

China has become almost completely self-sufficient for sourcing ferrous scrap even as its demand has risen. Restrictions on imports of all scrap metal caused Chinese ferrous scrap imports to collapse in 2019, falling by 86.3pc to 184,000t from 1.34mn t in 2018.

The bulk of those imports were done in the first half of 2019, with even more stringent restrictions enforced from July causing monthly totals to drop below 5,000t throughout the second half.

China offsets fall in wider global scrap usage

The continuing surge in Chinese ferrous scrap demand offset reduced consumption by most major steelmaking regions, apart from the US.

US ferrous scrap rose by 1pc on the year to 60.7mn t in 2019, a slightly lower rate than its 1.5pc rise in crude steel production.

By contrast, ferrous scrap consumption in the EU-28 countries fell by 3.7pc to 87.5mn t against a crude steel production drop of 4.9pc. Japan's steel scrap usage decreased by 7.7pc to 33.7mn t against a 4.8pc crude steel production fall, while South Korean ferrous scrap consumption dropped by 4.7pc to 28.5mn t against a 1.4pc decline in steel output.

Turkish ferrous scrap consumption declined by 10.9pc to 27.9mn t while crude steel output fell by 9.6pc as the country continued to struggle with the impact of the 2018 lira crisis. Russian steel scrap consumption also fell, by 4.3pc to 30.4mn t, against a 0.8pc drop in crude steel output.

The proportion of ferrous scrap used in overall crude steel production declined across all markets where scrap consumption decreased.