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The Chinese government approves standards and reportedly lifts the tariff on imported material.

China opens the door for steel scrap
China opens the door for steel scrap

Chinese steelmakers will be able to import steel scrap again starting in 2021

As reported Steelmakers in the People’s Republic of China will have access to imported steel scrap, newly defined as a resource and for which a previous tariff barrier has been completely lifted, starting in 2021.

More than a dozen scrap grades will become quota-free

China’s Standardization Administration has confirmed that a list of more than a dozen scrap grades (plus two stainless steel grades) has been approved as a “resource” for quota-free import. Incoming shipments are subject to inspection upon arrival at Chinese ports, but not a pre-inspection approval process.

Customs duty on imported steel scrap to be eliminated

That release was quickly followed by another from China’s Ministry of Finance, which calls for the elimination of a previous two percent tariff on imported steel scrap by Jan. 1, 2021. According to Argus Media, the ministry also reinstated MFN status for the approved raw material categories of steel and stainless steel scrap.

EAF steel production to be expanded

This combination of measures appears to have been introduced to support the expansion of electric arc furnace (EAF) steelmaking capacity in China. EAF is becoming increasingly popular, both because China is producing more of its own steel scrap and as a way to phase out integrated production as China seeks to reduce its carbon emissions.

Steelmakers plan to import more than 1 million tons of steel scrap

According to a report by S&P Global, steelmakers intend to import more than 1 million tons of scrap in 2021. Before the Chinese government began restricting scrap imports, it often turned to suppliers from Japan and Australia and will likely do so again.

Scrap Statistics of 2019

According to statistics from the steel division of the Brussels-based Bureau of International Recycling (BIR), Japan exported a total of less than 7.7 million tons of scrap in 2019, while Australia exported about 2.3 million tons. In the same year, China was not even among the world’s top 12 importers of scrap, but fell below No. 12 Belarus, which imported less than 1.3 million tons of scrap.

Steel scrap prices in the U.S. are on the rise

Whether or not Chinese mills buy steel scrap from the Pacific Coast of the U.S., their increased presence in the global market is likely to put additional price pressure on steel scrap in 2021. Steel scrap prices in the U.S. ended 2020 with an increase of $80 per ton.

China’s re-entry into the market “not good news”

Scrap trader and consultant Nathan Fruchter of New York-based Idoru Trading says a high-volume Chinese re-entry into the global market “is not good news” for steelmakers, “as it will lead to a shortage of scrap among current scrap buyers.”

Scrap prices to continue to rise significantly in 2021

Fruchter predicts, “This will drive scrap prices up further and also result in higher steel prices. As goes the scrap, so goes the steel. Think scrap prices are high this year? Just wait until Chinese New Year.” In 2021, the Chinese New Year date is Feb. 12.

Source: Various

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