The ferrous complex was firm again yesterday on post-CCP party restocking. Spot lifted, paper fell overnight but steel is strong:
In news, NDRC is revving up for scrap:
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China plans to increase its use of steel scrap by 23% to 320 million tonnes by 2025 and to increase production of recycled nonferrous metals, in an effort to ensure supplies and to meet the country’s climate commitments.
The NDRC also vowed to raise the substitution rate of renewable resources to primary resources and to enhance utilisation of low-grade ores, tailing dams and other resources.
China’s steel scrap usage was around 260 million tonnes in 2020, which could replace 410 million tonnes of 62% iron ore input, said the state planner.
This is roughly in line with the 14th Five Year Plan. An additional 60mt of scrap by 2025 is another 100mt of iron ore not needed.
For now, they are struggling to get their hands on it, at S&P:
As iron ore prices surge to never seen before highs, propelled by recovering global steel demand, an increasingly popular narrative is making its rounds in China on the potential of replacing, or supplementing, the Fe element in steelmaking with recycled steel, following China’s lifting of import restrictions on ferrous scrap in January 2021. While the reliance on iron ore may seem unassailable in the short term, demand for ferrous scrap is gradually gaining momentum under China’s overarching carbon neutrality goals.…With the passing of the first half-year mark for the new classification for recycled steel, scrap imports put no pressure on seaborne iron ore prices due to its limited usage in basic oxygen furnace, or BOF, thin cost-efficiency, and tight supply.
Despite a steady climb in China’s recycled steel imports, market participants expect this to have no impact on iron ore prices in 2021 due to the iron ore market’s unparalleled size and maturity.
In the first five months of 2021, China imported 471 million mt of iron ore, more than 1,915 times the import volume for recycled steel raw materials, which reached 246,346 mt over the same period, China’s customs data showed.
A trader, who has been active in the imported recycled steel market said: “Steel mills in Hebei have been extremely sensitive to the prices of recycled steel cargoes and the lack of financial instruments to mitigate risk exposures is also a limiting factor for higher trading volumes.”
Those scrap imports are next to nothing so far. They have gotten to nearly 10mt per annum in the past.
It’s going to take some serious work to get this transformation done.