Dr Baris Bekir Çiftçi, Head, Raw Materials Markets, worldsteel

2 May 2018

Last year around this time I wrote a blog arguing that growing scrap availability will potentially be a a game changer for the future of steelmaking. In this blog, I will try to expand on the expected growth in global scrap availability.

Our estimates suggest that global ferrous scrap availability stood at about 750 Mt in 2017, 630 Mt of which was recycled by the global steel and foundry casting industries. We expect that global scrap availability will reach about 1 billion tonnes in 2030 and 1.3 billion tonnes in 2050. In other words, we expect to see a growth of more than 500 Mt in one of our main steelmaking materials in the next 30 years.

Who will be leading this growth?

Developing countries, and particularly China, are expected to show the strongest growth in their scrap availability, reflecting the astonishing increase seen in their steel use in the 1990’s and 2000’s. China’s scrap availability is estimated to reach roughly 300 Mt by 2030 and 400 Mt by 2050, from about 200 Mt today.

Currently, China has a relatively low share of electric arc furnaces (EAF) and uses relatively less scrap than developed regions both in EAF and basic oxygen furnace (BOF) steelmaking but this could be set to change with the increasing availability of scrap. For more details, see worldsteel blog: Is it time for China to switch to electric arc furnace steelmaking?.

We are already seeing some important changes in the country’s steelmaking structure with the closure of about 140 Mt of induction furnace capacity and the application of new environmental measures curbing production. New EAF plants (approx. 50 Mt) are also expected to be commissioned over the next 5 years.

In other developing regions, such as India and the ASEAN, continued strong growth in steel production and use will also contribute to the growth in scrap availability. India and the ASEAN region are expected to see their scrap availability double in the next 15 years.

And what about the rest of the world?

Scrap availability in the rest of the world is also expected to grow albeit at a much slower rate than in the developing parts of the world. We estimate that the scrap availability in the regional grouping of NAFTA, EU, and Japan, a proxy grouping for the developed world, currently stands around 320 Mt and expected to reach about 350 Mt by 2030.

What does all this mean?

The strong growth in scrap availability suggests that in the medium and long-term we can expect the steel industry to increasingly replace natural resources by steel scrap, thereby conserving raw materials, energy, and reducing CO2 emissions.

Add your comment here:

  • Are you also foreseen any global impact on prices of scrap or they will remain mainly locally driven?

  • Hello Leonardo – many thanks for your question. Unfortunately, we are not able to comment on pricing.

  • The reverse trend with US EAF coming back onstream will consume more scrap than available locally. This will disturb export trade to Europe. Will US become a net importer of scrap in medium-term or until Trump tariffs are fully implemented. DOC Sec Wilbur Ross knows steel dynamics all too well!

  • You mentioned that current scrap availability is 200 Mt in China. But according to the BIR, consumption in the country was 147.9 million metric tons in 2017, while exports and imports were about 2 million tonnes each. Could you, please, explain the difference in figures?

  • Hi Anastasiya – many thanks for your question. We believe that including the ferrous scrap consumption by foundries and the induction furnaces – before they were shut by July 2017 -, China’s scrap consumption in 2017 should be considerably higher than the figure reported by the BIR (originally by the China Association of Metal Scrap Utilization (CAMU), if I am not wrong).

  • The move of shifting to EAF was well planned by China. A couple of years ago there was a report stating that excess scrap may be produced by China by 2030 and that’s what happening ! In all this demand – supply game of scrap and metal, the steel market is going to be volatile and the beneficiaries of all this are the graphite makers.

  • Hi Hatim -many thanks for your comment. I agree that we saw severe volatility in some of our raw materials markets in 2017 and we should expect to see significant volatility in the next few years too.

  • Hi Li Zhaoling – thank you very much for your comment. Let me try to provide a brief explanation of our scrap availability estimation work. Scrap availability is a flow variable showing the amount of scrap generated in a year. It is estimated as the sum of home scrap, prompt scrap and obsolete scrap arising in a year. We estimate the availabilty of all three types of scrap in order to establish the regional and global scrap availability in the future. Our estimates suggest that obsolete scrap availability will be driving the growth in global scrap availability in the future, particularly in China. The calculation of obsolete scrap availability in a region first requires the estimation of the amount of ferrous material that remains in the region by taking into account international trade of steel containing goods, i.e., indirect trade in steel. Then the useful lifetime, annual discard rates and specific material loss flows should be modelled for different types of steel containing goods in order to estimate the obsolete scrap availability in a year. As you can see, this is quite a data and assumption intensive work. I hope this helps.

  • As I understand, China closed 140MT induction steel plants, which charge 100% scrap. You also mention that new EAF plants (approx. 50 Mt) are expected to be commissioned over the next 5 years. Who will use the additional 90 – 120 MT volume of scrap? My view is that it will be the large BOF producers in China who will benefit from the closure of the induction furnaces.

  • Hi Oleg – many thanks for your comment. Allegedly induction furnaces consumed about 70 Mt of scrap in China in 2016. And reportedly average scrap charge increased in both steel production routes in China, reflecting the increased availability after the closure of induction furnaces in 2017.

  • Hi Baris – Is the projections for China to move towards Flat Carbon (FC) EAFs? This has been a US phenomena to date which has created large price differentials between obsolete & prompt scrap while the ROW works off a small standard differential as one moves up the scrap value train.

    Will DRI be introduced into China’s charge mixes for chemistry if expansion of FC EAFs occurs or will they just use a mid level percentage of Blast Furnace hot metal ?

    I believe your scrap availability numbers are too low. If one looks at the global scrap reservoir & considers all steel will become scrap in their projected life cycles’ minus an oxidation percentage, the volume availability of obsolete scrap will be at least 3 times greater. Availability is strictly a function of price. If the price is too low, peddlers will return to the pub & scrap yards will charge suppliers/demo contractors to take scrap off their hands. Its happened before.

  • In your view, what would be the situation of scrap availability in India in the next 5 years due to i) end of vehicle policy coming into implementation; ii) serious attempt made by the Govt. of India to ensure scrap availability through organized scrap collection and processing centres which includes shredding plants. One such plant is under implementation in Greater Noida, NCR, Delhi. More such plants are expected in other parts of the country. A significant point to be noted is that scrap collection, segregation and its use, hitherto a largely unorganized market in India, is trying to take an organized shape.

  • Hi Arun – many thanks for your comment. Indeed the Indian Government aims to promote the use and ensure the availability of scrap and is taking several steps towards meeting these objectives. These steps should certainly help improve the scrap collection and processing efficiency and the overall scrap availability in the country.

  • Hi John – many thanks for your comments and interesting questions!

    It is seen that globally EAFs produce mainly longs and the BF-BOF facilities produce mainly flats. We also see that NAFTA and Japan stand out with a relatively higher ratio for the EAF capacity that produces only flats. Now we are seeing that the EAF development in China is gathering pace. However, it is not easy to estimate what the share of those EAFs with flat casting capability will be in the future. This will depend on many factors such as energy and scrap availability and price, steel demand, investment decisions and requirements (age structure of current capacities, useful lifetimes, relining requirements, coke batteries), environmental & other regulations and the future of scrap quality. China currently stands out with a relatively high share of the BOF capacity dedicated to long products. Also, a massive Induction Furnace capacity, all of which used to produce very low quality rebars, was shut. So, I believe that in the near-term EAF development in China will probably focus on longs production. Nevertheless, I also expect to see some EAF development with flat casting capability as China is also a very large and vibrant country and some locations should show conducive characteristics for this kind of development as it happened in the past in the US and Japan, and to a lesser extent in Europe.

    As for your second question, I do not expect to see a significant DRI production in China, however, depending on the market conditions, we might see an increased DRI demand from China.

    As for your comment on our scrap availability estimates, I should say that our estimates perform quite well for many different regions of the world as a proxy figure for scrap supply. We see that our availability estimates move in line with consumption figures and they tend to be higher than the overall consumption. However, one should note that scrap availability, reservoir etc. are not standardized terms and the corresponding estimates might vary considerably depending on how they are defined. I agree scrap supply is mainly a function of price and availability (which is in turn a function of historical steel consumption, life cycle and trade of steel containing goods and current steel production and consumption). However, even for those years when we saw the highest ever scrap prices, our scrap availability estimates performed rather well as a proxy for scrap supply. For the future, we do not forecast prices and our availability estimates do not reflect any (potential) price impact. So I believe the actual scrap supply can exceed our availability estimates depending on the prices and demand, but probably not by 3 times and only temporarily.

  • Dear Dr. Ciftci, what do you think about the Korea scrap market? I just read some article showing that consumption has decreased in H1 2018 while imports have increased by 7.4%. What does this mean? Why? And, from a price point of view, how do you see 2019? I look forward to your comments and thanks really a lot!

  • Hi Eric – Many thanks for your question. It is indeed an interesting observation: Korea’s scrap consumption is decreasing while the scrap imports into the country are showing an increase. I do not follow Korea scrap consumption trends very closely, Nevertheless, one reason could be the varying raw materials consumption trends. Some users that use domestic scrap could have reduced their scrap charge or could be operating at lower capacity utilisation rates, whereas some other users that use more foreign scrap might have increased their scrap charge and/or might be operating at higher capacity utilisation rates.
    For 2019, it is not within my remit to comment on the Korea market. Nevertheless, global steel business might show similar characteristics and trends to those of 2018. As the main driving force of global steel business, China is expected to have a year that is similar to 2018.

  • Hi Baris, what is your viewpoint on EU steel scrap availability and potential switch of some BF/BOFs to EAFs (eg. older plants in Central Europe)? Some analysts claim EU should aim to increase EAF share in line with US model, that from 40 to 60 percent. Globally it does not make much sense, as there is not enough scrap to produce steel without virgin materials, therefore also emitting CO2. Thanks.

  • Hi Lukas – First, on your question on scrap availability in Europe, we expect scrap availability to grow modestly in EU28 in the medium-term, thanks to the growing obsolete scrap availability. With regard to your second question on the future of BF/BOFs and EAFs in EU’s steel production structure, I believe that the fact that two different facilities can produce steel does not necessarily mean that one can easily substitute the other one. Europe’s steel production structure will certainly continue to evolve and this evolution will be shaped by many factors some of which you already mentioned: demand for different types of steel products, regional energy availability and cost, investment decisions and requirements (age structure of current capacities, useful lifetimes, relining requirements, coke batteries), regulatory requirements particularly environmental, future of the recycling sector and raw materials availability and quality. Some factors such as the growing availability of scrap will probably support an increase in the share of EAFs in total crude steel production. Nevertheless, for Europe I would personally not expect this share to reach the levels seen in the US in the medium term.

  • Hi, Many thanks for this interesting and usefult post. Are your regional scrap availability projections possibly available anywhere? Many thanks!

  • It is time to review the various scrap types and their most likely chemistry. Is the World Steel Association participating in this kind of effort?

  • Hi Sandrakrish – very glad to hear that you found the blog informative. Please do not hesitate to contact us if you have any questions or comments on this topic.

  • Hi Anna – many thanks for your comment. Please feel free to contact us if you would like to hear further about the future of scrap availability in a particular region.

  • Hi Ronaldo – I fully agree with you that increasing scrap availability and scrap chemistry complexity will require increased R&D activity in scrap sorting, refining and management. As worldsteel, we performed several studies on this front and hope to pursue others in the future.

  • Thanks for the useful and insightful post. I am sure many people will gain a lot from it and become encouraged to recycle their waste products. Keep up the excellent work.

  • Hi Baris – The global population is expected to peak at around 10 billion people. For all of these people to benefit from development, the expected global consumption should be 300 kg per capita or 3 bn tons per annum of steel. With 1.3 bn tons available from scrap by 2050, the world would only need to make additional 1.7 bn tons from the iron ore route and this will continue to reduce with time, becoming negligible by 2100. The implications for global steel are immense.

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