News Room - Steel Industry

Posted on 10 Dec 2008

2009 China Scrap Supply to Keep Tight

I Anticipation on 2009 scrap resource (based on year-on-year growth rate)

 

1 Scrap demand: 2009 scrap demand is anticipated to demand 74 million tons of scrap.

 

2 Scrap output: a) China-produced scrap may attain 27 million tons; b) Society scrap, together with 4 million tons (year on year additions), is expected to hit 47 million tons. Hence domestic scrap output will total at 74 million tons.

 

3 Resource shortages: It is predicted that scrap shortage hit 10 million tons in 2009.

 

II 2009 scrap supply to tighten, and the price to run high

 

In the future, China steel market will run stable, and scrap supply continues not to satisfy the demand. It is anticipated that China scrap supply constrains will last for 10 years.

 

1 Scrap use: In 2000, China scrap-to-steel ratio was 22.7 percent, and then dropped to 14 percent in 2007, in comparison with the world level averaging 40-45 percent.

 

2 Iron ore import market: During 2005-2008, China iron ore import contract price rose by 71.5 percent, 19 percent, 9.5 percent and 96.5 percent respectively. It is anticipated that 2009 contract price will maintain high level.

 

3 Pig iron price to underpin scrap price: In the end of 2004, Chinese pig iron price averaged 2399 Yuan per ton (delivered to steel mills), 73 Yuan higher than HMS (2326 Yuan per ton). And in the early of November 2008, pig iron was priced 2461 Yuan per ton, 494 Yuan higher than scrap price, 1967 Yuan per ton. It is predicted that scrap price of 2009 will volatilize within 2000-3000 Yuan per ton.

 

4 Scrap import market: In 2004 or 2005, scrap import of China surpassed 10 million ton per year, and then scrap import market was featured by the price rising and the imports declining. However in the following year, the steel output of ASEAN, Japan, South Korea and China Taiwan is anticipated to shrink, which will contribute annual 6 million tons of scrap for Chinese buyers.