China's steel scrap exports tumble on strong domestic demand

SHANGHAI, Jul 27 (SMM) - China’s exports of steel scrap in June tumbled 96.5% year on year and stood at 7,000 mt, showed China Customs. Strong domestic demand and a clampdown on smuggling accounted for the significant decline.

Output resumption at EAF producers drove domestic demand for steel scrap. Production at EAF plants is expected to continue its growth as the Chinese government promotes EAF production and as mills purchase billet as raw materials on environmental concerns. More measures are expected to be introduced to support the development of EAF steelmaking.

Domestic demand for steel scrap weakened after China moved to eliminate induction furnaces between November 2016 and June 30, 2017. This lowered prices and promoted exports.

The government has stepped up environmental protection efforts, and ordered output cuts at steel mills in the non-heating season. But healthy profit margins, with rebar margins exceeding 1,000 yuan/mt and hot-rolled exceeding 1,200 yuan/mt, encouraged steel plants to increase output by raising the use of steel scrap. The steel scrap ratio at a steel plant in Tangshan currently stands at 18%, but could be raised to a maximum of 30%.

Smuggling of steel scrap was rampant. Sixty-five smuggling rings, worth some 4.8 billion yuan, were caught in the crackdowns on steel scrap smuggling, said Chinese Customs on June 6.