NEWSBREAK: China to release new standards for steel scrap imports by end of year

The new standards will support the rising demand for ferrous scrap in China and will introduce the nationwide classification and regulation of high-quality scrap, according to the China Metallurgical Information & Standardization Research Institute.

The rules will restrict imports of low-quality scrap with dangerous materials and pollutants, the institute said at the conference on Tuesday October 13.

The Chinese authorities started clamping down on imports of ferrous scrap in 2019 amid a drive to cut pollution levels and raise domestic scrap consumption.

China has since allocated tiny monthly import licenses for steel scrap, with September’s quota at just 2,610 tonnes, bringing the total volume allocated in 2020 to the end of September to just 23,100 tonnes, data from government body the China Solid Waste & Chemical Management (CSWCM) shows.

In 2018 – the last year before the import restrictions were implemented – China imported 1.34 million tonnes of steel scrap, according to the Bureau of International Recycling (BIR), with 337,000 tonnes of that total shipped from Japan.

In March, high local scrap costs, together with rising scrap demand in China, led to a call from the China Association of Metalscrap Utilization (Camu) for the government to re-open the country to greater quantities of ferrous scrap imports.

High domestic scrap prices in China are likely to be the largest trigger for the policy change, a major Japanese scrap exporter told Fastmarkets on Wednesday October 14.

Fastmarkets’ price assessment for ferrous scrap heavy scrap domestic, delivered mill China was 2,590-2,770 ($385-412) yuan per tonne on October 9.

As a comparison, Fastmarkets’ price assessment for steel scrap H2 export, fob main port Japan was ¥27,000-28,000 ($256-266) per tonne on October 7. This  would be equivalent to about 2,200 yuan per tonne at major Chinese ports once freight of around $30 per tonne and a 13% value-added tax are taken into consideration, making Japanese H2 scrap 390-570 yuan per tonne cheaper than the domestic heavy scrap sold in China.

Japanese exporters expect that higher-grade Japanese scrap such as Shindachi busheling and plate & structural (P&S) scrap, which is known as ‘HS’ in Japan, are likely to be the main materials exported to China following any change to the import rules.

China is likely to allocate import licenses for high-grade material to large steelmakers in the country such as the Shagang Group, the Japanese scrap exporter said.

“If the Chinese market opens up for Japanese scrap, I don’t think Japanese material will go into Bangladesh or India any longer because there will not be any surplus material available,” he said.

Japanese steel scrap exports to Bangladesh rose by more than 300% year on year to 394,851 tonnes in the first half of 2020, amid stronger demand from the rapidly-developing South Asian nation, according to statistics from Japan’s finance ministry.

An increase in Chinese steel scrap imports will also have a knock-on effect across the ferrous chain into the iron ore market, a source at a major scrap trading company told Fastmarkets.

Greater use of steel scrap within China is likely to increase the bargaining space for iron ore buyers in China because there will be greater volumes of raw materials available to Chinese mills, he said.