Challenges in the Scrap Steel Industry: Reduced Production, Falling Prices, and Shrinking Profits

From December 6-8, 2023, the "2023 National Scrap Steel Conference" and the "Sixth Expanded Meeting of the Seventh Session of the China Scrap Steel Application Association" were held in Xiamen. Discussions focused on industry trends and key issues, offering insights and direction for the scrap steel sector and its businesses amid current conditions.

Scrap Steel: An Increasingly Important Resources

Cheng Huiqiang, Director of the Department of Resource Conservation and Environmental Protection at the National Development and Reform Commission, said that since the 13th Five-Year Plan, the department has actively supported scrap steel recycling industry growth with planning, policy guidance, tech promotion, investment support, tax incentives, and pilot demonstrations. The Department of Resource Conservation and Environmental Protection will aim for the carbon peak and neutrality goals, building a complete waste recycling system covering all areas, types, and life cycles. Focusing on recycling systems in 60 key cities, it will tackle scrap steel recycling industry issues like land, energy, approvals, tax breaks, initial invoicing, and carbon trading, to promote its eco-friendly, high-quality growth.

Challenges in the Scrap Steel Industry: Reduced Production, Falling Prices, and Shrinking Profits

Feng Helin, Executive Vice President and Secretary-General of the China Scrap Steel Application Association, reported on the association's seventh council. Between January and October 2023, China's crude steel output was 874.7 million mt, up 1.4% YoY; pig iron output was 744.75 million mt, up 2.3% YoY; scrap steel consumption in steelmaking was 183.35 million mt, down 1.11 million mt or 0.6% YoY. Scrap steel use per mt of steel was 209.6 kg, a 2.2% drop of 4.8 kg YoY. Steel scrap use in converters fell by 4.2 kg/mt to 168.1 kg/mt, down 2.4% YoY, and steel scrap use in electric arc furnaces decreased by 8.5 kg/mt to 592.3 kg/mt, down 1.4% YoY. The ratio of scrap steel usage was 20.96%, down 0.48% YoY; electric furnace steel's share was 9.78%, slightly down by 0.04% YoY.

Scrap steel prices fluctuated due to market forces, peaking at 3,159 yuan/mt and bottoming at 2,748 yuan/mt, averaging 2,932 yuan/mt for the year.

In 2022, China imported 558,900 mt of recycled steel raw materials. BIR data shows global recycled steel raw material trade decreased by 14.3% to 97.6 million mt, with China's imports making up just 0.57% of this total.

From January to October 2023, China's recycled steel raw material imports rose 15.41% YoY to 456,800 mt; 54.96% from Japan (251,000 mt), 10.53% from South Korea (48,100 mt), and 6.84% from Malaysia (31,200 mt).

Feng Helin remarked that in 2023, the scrap steel industry faced production drops, price falls, and profit declines due to changing downstream demand – a tough but typical cycle in industry evolution. Current eco-friendly and low-carbon trends, mineral resource security, the EU's CBAM, and the downstream industry's smart, eco-friendly growth offer scrap steel industry transformation opportunities. Enterprises should strategically plan to capitalize on these for improved development.