China's long-awaited steel scrap standards agreed

At a closed-door conference held in Beijing on November 29, Chinese government bodies including the Ministry of Ecology and Environment finally approved new classification standards for the country's steel scrap sector. Though the details are yet to be released, the new standards classify categories of steel scrap and are comparable to those in use internationally, paving the way for China to re-open its ports to approved types of foreign steel scrap, Mysteel Global notes.

Despite the size of China's steel scrap industry, until now the country has lacked a unified system of steel scrap classifications and those that Chinese steelmakers and scrap collectors are presently using have been described as "crude" and at odds with those of other countries, as reported.

The final official document and more details about the new criteria will be released by the end of this year, according to a report on the conference from Xinhua News Agency, China's official media.

For scrap processors and traders outside of China, the new standards agreed on Sunday will be extremely welcome as they define the parameters for what materials constitute "recyclable steel raw materials" - materials that forthwith, will be regarded as 'to-standard' steel waste and whose free import will be permitted - and what China's Customs inspectors will decide is "garbage" - in Beijing's parlance - whose entry will be blocked.

"We are excited that the criteria will finally be revealed, as the whole scrap industry has waited too long," a Shanghai-based scrap-market participant commented.

Industry grouping, the China Association of Metalscrap Utilization (CAMU) and related governing bodies have been working closely on specifying and standardizing domestic steel scrap supplies for the past couple of years, as reported. In late November 2018, CAMU Secretary-General Li Shubin outlined the problem regarding the absence of universally agreed steel scrap classifications.

"At the moment, tests for the quality and type (of steel scrap) are all just visual checks, without any third-party verification. Differences of opinion on quality, and arguments over price, occur frequently during scrap trading," he noted.

The Shanghai source highlighted the boon the decision will mean for scrap importers. "The agreement reached at the meeting will quicken the pace of China re-opening to imports of steel scrap," he told Mysteel Global.

Once the new standards are published and the scheme implemented - possibly from January 1 next year - they will create a legal framework that will help enhance market order, pricing and transparency.

Moreover, should the pace of imports pick up as a consequence of the scheme's implementation, scrap consumers will have more leverage in determining steel scrap prices, compared with now where most are obliged to accept the price demands of domestic suppliers or face insufficient deliveries, Mysteel Global noted.

Last week for example, China's domestic steel scrap prices increased by Yuan 24.8/tonne ($3.8/t) on week to Yuan 2,718.6/t on delivery and including the 13% VAT as of November 27, the highest since April 16 2013, Mysteel's data shows. Behind the consistent increase was steelmakers' firm demand for scrap against the seasonal supply tightness in winter.

Written by Lindsey Liu, liulingxian@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint Research