SMU Update on China’s Move to Export Ferrous Scrap

With the shuttering of up to 150 million tons of induction and EAF steelmaking capacity in China reducing its consumption of ferrous scrap, the Asian giant has actually begun exporting scrap material.

Steel Market Update (SMU) has been following the progress of the Chinese as they attempt to enter the ferrous scrap export markets. They clearly have some impediments to overcome.
 
Since China has not exported scrap in the past, the country does not have the processes in place to sort the various grades of material. Japanese and Koreans have been working with traders in China to help them learn how to sort and reference the different types of scrap.

China’s tax system is another obstacle for scrap traders. China places a 40 percent tax on scrap exports. Even with the government’s willingness to waive the 17 percent value-added tax, taking the total down to 23 percent, the price of the material remains too high for most export markets.
 
SMU’s source in China reports there have been few sales of Chinese scrap to date, and none in the United States. He believes the pace will pick up as traders work through the supply chain issues, and estimates China could export about 20 million metric tons to the world market through 2017.
 
At present, Chinese scrap bundles are priced around $200 per metric ton FOB China. Containers of low residual scrap are at about $250 per ton. Orders to date are few and small, typically less than 1,000 tons, as the cost, including freight, makes them non-competitive with other origins, noted SMU’s source. “Right now, scrap is coming mainly from Southern China ports. Northern port scrap is all bonus or low residual and too expensive.”
 
SMU Note: Many believe China will eventually become a major supplier of scrap onto the world stage, including the United States. We will continue to watch developments in the ferrous scrap export market in China and keep our readers advised.