Increased scrap collection rates to lower Chinese iron ore demand

Author: Paul Ploumis
10 Feb 2015 Last updated at 00:56:37 GMT
BEIJING (Scrap Monster): The Chinese attempt to boost steel scrap collection rates is expected to lower the demand for iron ore in the country- the world’s primary consumer of the raw material. This is expected to further worsen the global supply surplus of iron ore.

The country had imported 933 million tonnes of iron ore during 2014. According to estimates, nearly 80% of the country’s iron ore requirement was met by imports from other countries. However, the Chinese administration has asked steel mills to source steel scrap to meet their raw material requirement in order to cut down the over dependence on iron ore imports. The scrap generation rates are likely to touch 200 million tonnes by 2020. Consequently, the iron ore demand is expected to subside significantly from 2017 onwards.

According to analysts at CLSA, the surge in Chinese scrap collection rates will dampen the demand for iron ore in the country starting 2017 onwards. The Chinese administration has called for focusing more on utilization of steel scrap from landfills and end-of-life concrete structures. The government initiative to set up scrap collection and sorting facilities is likely to generate huge quantities of scrap this year onwards. The country’s scrap ratio is expected to rise to nearly 20% by 2020 and to 30%-39% by 2030.

Meantime, latest import data released by the Customs Department indicates that iron ore imports by China dropped significantly during the month of January this year. The imports totaled 78.6 million mt during the month, dropping by 9.5% when compared with Dec ’14 and down 9.4% when compared with Jan ’14.