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Chinese steel body rallies support to open country for scrap imports

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Chinese steel body rallies support to open country for scrap imports

Singapore — The China Metallurgical Information and Standardization Institute, or CMISI, has begun to rally support from industry participants to accelerate its appeal for the country to open its doors for ferrous scrap imports.

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The steel body is planning to hold an industry event in Tianjin later this week, and will open discussions and feedback across the floor to participants including, electric arc furnace steelmakers, scrap processors and yards, traders, and financial institutions, amongst others. This is expected to contribute toward the creation of a national standard for scrap, which will be used to promote imports of the raw material.

This step forward was hailed by local electric arc furnace steelmakers, as scrap prices have been a bugbear since the country shuttered its doors to its importation.

The local industry too has continued to struggle with numerous non-standardized classifications of scrap, particularly leading to fragmentation whereby different mills have various expectations of scrap qualities and specifications.

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CMISI, together with the China Association of Metal Scrap Utilization, or CAMU, previously in March announced its proposal to be among those that spearhead the lifting of import bans and restrictions on scrap for Chinese steelmakers.

Part of their plans were to push for the imports of only high quality scrap -- proposed to be dubbed recycling steel materials -- which fell in line with the direction of the country's environmental ministry.

"There are still a lot of hurdles and steps required to push for this," a major eastern mill source said. "Realistically, we doubt the restrictions will be lifted this year, but with each step forward, hopefully we can see some positive results next year."

The opposition to scrap imports began in July 2017, as China sought to prevent itself being the region's dumping ground for waste. Various bans and restrictions covering scrap took effect on December 31, 2018, and later widened in coverage to include more grades from July 1, 2019.

This changed the game for many in the Asian region, and cause a ripple of related effects from various customs buildups, stricter importation rules, and creation of new trade flows relating in mixed, or unprocessed, scrap.

China too felt a pinch from its own restrictions, where it created its own secluded market for scrap. By restricting itself from the importation of scrap, and together with its current 40% export tax on the commodity, the country ultimately saw no inflow and outflow of scrap.

As a result, Chinese scrap prices lost correlation with international prices.

Current prices in China for thick scrap, particularly favored by blast furnace steelmakers, were $100/mt higher than that within neighboring Japan, S&P Global Platts reported previously.

With the country generating about 200 million-220 million mt of scrap annually, local prices have been kept expensive compared with other steelmaking nations due to continued high blast furnace demand, and lack of a strong domestic distribution network.

With the possibility of China returning to the imports in the near future, suppliers were looking forward to a possible boost in demand within the seaborne market, amid falling volumes for most destinations since 2018.