MYSTEEL: China ferrous scrap supply seen rising marginally in 2025

Mysteel Global: The supply of ferrous scrap in China is expected to pick up slightly next year as scrap generation from the manufacturing sector is expected to rise, according to Mysteel's latest forecast for the market for 2025. Scrap arising from the construction industry is seen declining, however.

For this year, Mysteel estimates that the country's total ferrous scrap supply will drop by some 4.5 million tonnes or 1.8% from 2023 to 251.5 million tonnes. During 2025, supply may increase to around 252.5 million tonnes, higher by a small 0.4% on year, the report suggests.

The slow progress being made in domestic building demolition projects was a main reason cited for the reduction in overall scrap supply this year, as reported. During January-November, the total volume of demolition steel scrap collected by the 105 steel scrap recycling companies nationwide under Mysteel's regular tracking averaged 23,258 tonnes/month, lower by a substantial 13,670 tonnes/month or 37% compared with the same period last year.

Supported by a package of policies introduced by China's central government, these days house properties in China are less frequently regarded as financial assets and instead, viewed as consumer items, the report said, observing that this trend signals an end to the rapid growth of the real estate market in earlier years. As such, steel scrap supply from demolition sites will continue to decline next year, it predicts.

Nevertheless, the manufacturing sector has performed strongly this year and will remain a key driver of the economy in 2025, the report highlighted. With government efforts to promote "trade-in" initiatives for goods such as automotives and home appliances proving generally successful, consumption of these items keeps rising - a factor that has the potential to boost the volumes of steel scrap arising in these sectors, it argues.

Ever since the "trade-in" policy for automobiles was introduced in late April this year, domestic steel scrap processors have seen a steady increase in the volume of end-of-life vehicles (ELVs) delivered to their yards, as Mysteel Global reported. In November, a total of 49,000 ELVs were scrapped and shredded by the 85 domestic automotive scrapping and dismantling companies under Mysteel's tracking, higher by 22.8% compared with the same period last year.

Despite the likely increase in the scrap generation, total scrap supply may still fall short of demand from steelmakers, Mysteel's report suggests.

China's total consumption of ferrous scrap this year is estimated by Mysteel at 251.81 million tonnes, and while this is lower by some 1.5% from last year, consumption next year is expected to rise by 0.8% on year to reach 253.71 million tonnes.

Although China's National Development and Reform Commission had suspended approvals for capacity swap arrangements in the iron- and steelmaking sector last August, new electric-arc-furnace projects that had previously been approved are still under construction, and some of these are designed to come online in 2025, according to Mysteel's tracking, driving up steel scrap demand next year.

In fact, the country's Ministry of Industry and Information Technology (MIIT) announced this month that it is accelerating the revision of the steel capacity swap guidelines in line with its plan to optimize the steel industry, as reported. Many provinces have published specific energy-saving and carbon-reduction plans, all emphasizing the need to boost steel scrap consumption, Mysteel Global notes.

However, the firm demand for scrap may still provide only limited support for ferrous scrap prices in China, Mysteel's report warns. The intensifying mismatch between the steel supply and demand is expected to continue dragging steel prices lower, which will likely place significant downward pressure on the prices of steelmaking raw materials including steel scrap, according to the report.

During this year, China's national composite steel scrap price averaged Yuan 2,749.65/tonne ($377/t) including the 13% VAT as of December 24, lower by some Yuan 279/t or 9.2% compared with the average price last year, according to Mysteel's assessment.

Mysteel estimates that the country's steel scrap price will continue tracking downward in 2025 and slide more significantly, with the average price falling by some 12.6% on year.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.