China unexpectedly did not buy scrap steel in August. President Xi Jinping issued measures to restrict the import of solid waste to protect the environment. China is likely to become a net exporter of scrap steel in the long term.
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For the first time in nearly 19 years, the world’s largest steel producer did not buy scrap steel from abroad. According to customs data, China’s imports of this material dropped to zero in August.
Despite the rising price of iron ore and limited domestic supply, scrap steel imports have tended to decrease since the beginning of this year. The reason is that Chinese President Xi Jinping has introduced measures to restrict the import of all solid waste to protect the environment.
However, the supply of this material in the domestic market is expected to increase significantly after 2020, mainly from broken steel appliances such as cars or destroyed buildings.
According to consulting firm Kallanish Commodities, the import of scrap steel will face a major barrier in the future, which is an increasing domestic supply. “We expect China could become a net exporter of scrap steel in the long run.”
Currently, Beijing imposes a 40% tax on scrap steel exports, and this regulation could be relaxed, according to Kallanish. “This can only happen if the authorities realize that the scrap supply is redundant and paving the way for export will not cause a price shock.”
China is currently the largest consumer of scrap steel in the world in terms of volume, though still far behind the US and Europe in terms of the proportion of steel originating from recycled metals. The government wants to boost steel production from this material and electric arc furnaces, while reducing the dependence on traditional iron ore furnaces. The aim is to improve both environmental pollution and to take advantage of available domestic scrap.