scrap consumption will remain high over the next decade based
on patterns in the global ferrous scrap sector, AMM
sister publication Metal Bulletin reported, based on a
report by Metal Bulletin Research (MBR).
Scrap consumption in
the global steelmaking and foundry industries has risen rapidly
since 1985 and is expected to grow until 2021, with the pattern
of consumption likely to change radically over the same
The consensus among
many observers is that China will become a net exporter of
scrap after 2020.
Before then, however,
the transition from the country being a net importer of scrap
to a net exporter will be delayed by increased domestic
consumption of scrap, mostly in the basic oxygen furnace (BOF)
sector, and government policy, according to MBR.
Beijing will likely
work to discourage scrap exports and instead divert material
toward feeding the growing Chinese steel industry, albeit one
growing at a slower pace than in the recent past.
foundry sector will be an important driver for global scrap
market trends overall until 2021, with demand for scrap in
China expected to increase 7 percent per year on average until
2021, at a time when the worlds scrap supply will
dramatically increase to well over 2 billion tonnes. The bulk
of this supply will come from obsolete scrap, stemming from the
past decades substantial manufacturing.
of domestic scrap could lead to convincing arguments for the
country to refocus its steel industry from now until 2021
toward start-up and expansion of electric-arc furnaces (EFs),
which will see greater scrap consumption, in addition to rising
consumption by the BOF sector.
There are a number of
reasons why EFs will proliferate in China in the years leading
up to 2021.
spending will continue to increase steel consumption and will
require the building of new steelmaking capacity, particularly
in the countrys central and western provinces.
So mills will be
built, despite the slowdown in Chinas top-line economic
growth, because the relationship between the countrys
gross domestic product (GDP) growth and rates of steel
production and consumption will remain largely unchanged until
Beijing will count on
the construction of new EFs to mitigate the political
consequences of the closures of obsolete and uneconomical
This strategy will
enable new investment and employment to be poured into the
right locations, which in turn will suit an increasingly
localized construction product industry.
Investment in EFs will
be stepped up in response to Chinas growing concerns
about pollution, with a concerted central government campaign
to cut coal usage.
capacity costs $600 to $1,200 per tonne up to the semi-finished
product level, depending on global location, with Chinese
production at the cheaper end of this spectrum. New EF
capacity, however, costs $200 to $350 per tonne up to the
semi-finished level, again with Chinese production being toward
the lower end of this range.
costs represent, on average, 6 percent of capital expenditures,
or $46 to $75 per tonne for integrated mills and $18 to $20 per
tonne for EFs.
Costs incurred for
environmental protection compound the difficulties.
Compared with BOFs,
EFs use 75 to 85 percent less energy, 90 percent less virgin
materials and 52 percent less water. They also produce 76
percent fewer water pollutants, 86 percent fewer air pollutants
and 97 percent less mining waste.
The risk of scrap
shortages in China over the next eight years is low. The only
potential issue foreseen is the sheer size of the expected
increase in domestic scrap consumption in the decade between
2012 and 2021. The one potential problem will be the ability of
the supply chain to develop the infrastructure necessary to
EF steelmaking in
China could viably increase from the 10 percent share it
commands today to closer to 15 percent over the forecast
A version of this
article was first published in AMM sister publication Metal