Higher iron ore costs propel use of scrap as feedstock at steel mills

SHANGHAI, Aug 1 (SMM) – Higher prices of iron ore have prompted Chinese steelmakers to increase the use of steel scrap in the feedstock to reduce costs, even as shortage also pushed up scrap prices, an SMM survey found on Wednesday July 31. 

However, this could only serve as a short-term method as the proportion of steel scrap in raw materials shall not exceed 25%, with a regular ratio of 10-15%, SMM assessed. Firm scrap prices deepened losses at electric arc furnace (EAF) steelmakers with scrap as feedstock across south China, which reinforced concerns about the sustainability of expanding the use of steel scrap. 

Relatively weak prices of steel finished products, pressured by significant increases in new capacity from the start of the year and a recent seasonal lull, squeezed margins at steel mills and also grew the need to cut costs. 

Hot-rolled coil mills that received improved orders for August attempted to ease costs pressure by expanding production, SMM learned.