Workers use an automatic milling machine to process steel plates in Jingjiang, East China's Jiangsu Province on November 24, 2020. Photo: cnsphoto

China plans to use more scrap steel as a raw material in its steel plants, a move that analysts said will reduce reliance on iron ore imports from Australia, amid fraught bilateral ties, soaring ore prices, and in align with China's pursuit for carbon neutrality by 2060. 

The national standard for recycled scrap steel released recently is to be officially implemented on January 1, according to the website of National Public Service Platform for Standards Information.

Recycled steel raw materials are considered the only ferrite resource that can replace iron ore.

"Encouraging the import of recycled iron and steel raw materials can play a role in alleviating the shortage of resources and restrain the price of imported iron ore from rising sharply, while easing the cost of production and capital pressure of domestic steel enterprises," read the platform's website.

Prices of Australia's major export commodity, iron ore, have been rising this year amid the COVID-19 pandemic, and surged nearly 30 percent in the last two months. About 80 percent of Australia's iron ore exports was shipped to China in 2019, which accounted for about 60 percent of China's iron-ore imports.

Luo Tiejun, vice president of the China Iron and Steel Industry Association, said the recent sharp price increases of Australian ore deviates from the fundamentals of supply and demand, caused by abnormal bidding by traders.

In 2019, China's steel output was 996 million tons, and about 240 million tons of scrap steel were used as a raw material, official data showed. Recycled steel is playing an increasingly important role in steel production, especially short-process production.

Compared with the utility ratio of recycled scrap steel in steelmaking in developed counties, there is still a big gap for China to catch up due to the lack of scrap steel resources.

Data from the Bureau of International Recycling (BIR) showed that, in 2017, except for China, the average recycled steel raw material ratio in other countries exceeded 50 percent, while the ratio reached 72.1 percent, 55.5 percent and 34.2 percent respectively in the US, the EU and Japan.

Wang Guoqing, research director at Lange Steel, told the Global Times on Monday that greater use of scrap steel in China is likely to increase the bargaining space for the major iron ore buyer because there will be more raw material available to Chinese factories.

"Importing more high-quality, environmental-friendly recycled steel should be encouraged," Wang said.

China imported only 184,000 tons of recycled steel in 2019, which is far from the 103 million tons available worldwide.

Global scrap steel exporting countries are concentrated in the US, Germany, the UK, Japan and other countries that have completed industrialization and urbanization. China mainly imported from Japan, the US and other countries.

As a renewable resource, the use of scrap steel can significantly reduce carbon dioxide emissions, which will help promote the country's pledge to realize carbon neutrality by 2060, noted Wang.

Global Times