Asia: China's effort to
raise the amount of steel it recycles will have a growing impact on demand for
raw iron ore from this year, Reuters has reported. Analysts say the development
'threatens to worsen a worldwide supply glut, putting further pressure on
global suppliers.
China imported a record 933 million tonnes of
iron ore in 2014, meeting 78.5% of its total needs. Now the country is trying
to make more use of vast amounts of steel buried in landfills or encased in
concrete. Analysts expect that improved collection rates could see as much as
200 million tonnes of scrap generated per annum by 2020. Mining group BHP Billiton
has forecast that China's scrap ratio will rise to around 20% by 2020 and up to
39% by 2030.
According to Mr Ian Roper, an analyst at CLSA,
who points out that Chinese blast furnaces only use 8% scrap, Iron ore demand
is going to be in decline from 2017 because scrap generation will be growing
faster than demand. You can run that up to 20%. It isn't going to be left on
the ground.
Mr Huang Dao, an official with the China Iron
and Steel Association said that 91% of China's steel production comes from pig
iron rather than scrap, compared to around 35% in the USA. China's scrap steel
collection is pretty low because looking at the life of construction materials,
which last 70 years or even longer, rebar buried in cement cannot immediately
return to the smelter.
Mr Oliver Ramsbottom, a partner at McKinsey who
follows the Chinese steel market, believed that a larger reservoir of scrap
will emerge this year after strenuous efforts by the government to 'create a
structure' for the market by setting up scrap collection and sorting
facilities.
Major miners such as Vale, Rio Tinto and BHP
Billiton have increased production by 234 million tonnes in the last two years,
driving down prices and boosting their market share in China, which accounts
for roughly two thirds of global seaborne iron ore shipments.
Source- steelguru