Since 2018, with the help of the production-limiting policy of environmental protection, due to the effect of market price adjustment, scrap price has started to produce linkage with steel price, and the positive correlation between scrap price and molten iron cost has become more and more obvious, that is, scrap price increases as the cost of molten iron rises. The stability of steel market price becomes the support of scrap price.
Due to the steady increase of scrap steel application in regular steel mills, as long as the steel price does not fluctuate significantly, scrap prices will be relatively stable; And if the ore price down shock finishing, scrap prices will be under pressure down. Tang shan area since 2015 scrap (6 mm to 8 mm), steel making pig iron (L8 L10) and billet (Q235, tax) price trends, the difference between the steel scrap and pig iron and June 30, 2017 "DeTiaoGang" compared to the time node, was narrow, and scrap steel relatively long process of iron ore production cost advantage is gradually revealed, the enthusiasm of application of scrap iron and steel production enterprises gradually improve.
By October 31, 2019, the price of heavy waste (cash, excluding tax) in major cities nationwide was 2,366 yuan/ton, slightly higher than the average cost of hot metal (excluding tax) from 2,270 yuan/ton to 2,380 yuan/ton, or basically the same. Scrap price advantage is gradually emerging. With the continuous improvement of steel scrap application level in China's steel industry, China's steel scrap industry will usher in an important opportunity for development.
Scrap steel is the only substantial alternative to iron ore
High grade iron resources
Scrap is one of the two indispensable iron ore resources in iron and steel industry. Compared with iron ore steel, steel scrap steel has significant environmental benefits, can save 60%~70% energy and 40% water. According to the actual amount, using scrap to make 1 ton of steel can save 350 kilograms of standard coal, 1.7 tons of new water, 1.3 tons to 1.5 tons less refined ore powder, and at the same time reduce 86% of the waste gas, 76% of the waste water and 92% of the solid waste.
In terms of process, scrap is mainly added in the converter in the long process of steel production with iron ore as the main raw material. In China, the proportion of steel scrap is more than 30%, and in Japan and South Korea, the proportion of steel scrap is more than 40%. In short - process steel production (eaf steelmaking), scrap steel is almost used as the main raw material.
The supply of scrap will increase year by year
From the source, scrap is mainly divided into four categories: self-produced scrap, processed scrap, depreciation scrap and imported scrap. Self-produced scrap is produced in the production process of steel mill cut head, cut tail, chip, scrap, scrap, the recovery of this part of scrap can reach 100%. Processing scrap and depreciation scrap collectively known as social scrap. Among them, the processing scrap is mainly produced by downstream steel manufacturers in the process of steel processing. Depreciation scrap is the scrap steel produced after the products of automobile, construction, machinery and other industries reach the scrap life, which is the main source of scrap steel. In recent years, due to the requirements of the national environmental protection policy, the amount of imported scrap steel has decreased year by year to nearly zero by 2019.
Since the scale of self-produced scrap and processed scrap is relatively stable, the increment of scrap in the future mainly comes from social scrap. In 2019, nearly 70 percent of scrap resources will come from social recycling channels.
According to the data released by China scrap iron and steel application association, the total output of scrap steel resources in China in 2018 is about 220 million tons, an increase of 20 million tons or 10% year on year. Among them, steel enterprises produced 40 million tons of scrap, accounting for 18% of the total resources; 180 million tons of scrap steel was procured from the public, accounting for 82% of the total resources. It is expected that the total amount of scrap steel in China will be 250 million tons in 2019, an increase of more than 30 million tons year-on-year, among which the amount of scrap steel purchased by the society will be around 200 million tons. By 2030, the social steel stock will reach 13 billion tons to 13.5 billion tons, and the annual production of scrap steel resources will reach 320 million tons to 350 million tons.
The development of China's iron and steel industry promotes the improvement of scrap application index
In the first nine months of 2019, China produced a total of 612.03 million tons of pig iron, 747.82 million tons of crude steel and 909.31 million tons of steel, up 6.3 percent, 8.4 percent and 10.6 percent year-on-year. In September, the output of pig iron, crude steel and steel was 67.31 million tons, 82.77 million tons and 104.37 million tons, respectively. The average daily crude steel output in September was calculated to be 2.759 million tons. From January to September, China averaged 2.739 million tons of crude steel per day, up 222,000 tons from 2.517 million tons in the same period in 2018. Based on the average daily crude steel level or average daily crude steel growth in the first nine months of this year, China's annual crude steel output in 2019 will exceed 1 billion tons.
Since 2019, the overall profit of China's steel industry has been greatly reduced in spite of abnormal fluctuations in iron ore prices. According to the data released by the National Bureau of Statistics, from January to September, the total profit of China's ferrous metal smelting and rolling industry dropped by more than 40% year on year. The operating cost was 4911.3 billion yuan, up 12.5% year on year; With the increase of operating cost, the profit of the industry was only RMB 19.721 billion, down 41.8% year-on-year. Industry profit margins were just 3.7%, down nearly 40% from 6.0% for the whole of 2018. The average net profit of crude steel in the industry was only 264 yuan/ton, down 170 yuan/ton or nearly 40% from the annual level of 433 yuan/ton in 2018.
China scrap industry has great potential for future development
With the continuous deepening of the country's supply-side structural reform, scrap processing enterprises have ushered in a good opportunity for their own development.
First, from the perspective of the long-term development of China's steel industry, the state encourages the use of scrap steel and short-process steel making, and encourages enterprises to replace the remaining capacity to areas with surplus scrap steel resources without adding new capacity. In the national iron and steel industry "145th" planning seminar, the steel association put forward the requirement that the proportion of electric furnace steel in the capacity replacement of China's iron and steel industry should not be lower than 30%, which also provides a broad space for the application of scrap steel in China in the future. Previously, the Ministry of Industry and Information Technology had proposed in the steel industry adjustment and upgrading plan (2016-2020) that China should reach the target of 30% scrap steel ratio by 2025.
Secondly, from the current level of scrap recycling utilization, compared with the average level of scrap utilization in the world, there is still a big gap in China. Data released by the international bureau of recycling (BIR) shows that in recent years, the average scrap ratio in the world's major producing countries is 35.5%. Among them, the scrap ratio in Turkey is as high as 80.8%, 72.1% in the United States, 34.2% in Japan, and only 20.2% in China. Thus, China scrap field development space is huge. As early as 2016, Yin ruiyu, an academician of the Chinese Academy of Engineering, conducted the research of "strategy of developing China with iron resources from 2016 to 2030", and made such a prediction: by 2030, the scrap ratio of China's iron and steel industry could reach more than 30%, and it is expected to reach and exceed the global average level.
Finally, the strengthening of environmental protection supervision and the establishment of carbon emission trading system in recent years have created conditions for steel enterprises to strengthen the use of scrap steel. Compared with the long process of "iron ore - molten iron - billet", the use of scrap steel to make steel can greatly reduce the emission of air and water pollution. In 2018, the three-year action plan to win the battle to protect the blue sky was launched, bringing the development of China's scrap steel industry into an important turning point. This year, China's total scrap consumption in 190 million tons; Scrap consumption was 202 kg/t, a year-on-year increase of nearly 25%; The single consumption of electric furnace scrap was 662 kg/t, an increase of nearly 7%. Scrap ratio of 20.2%, year-on-year growth of nearly 25%. Due to the application of scrap steel, the crude steel output ratio of China's electric furnace steel in 2018 was nearly 10%, 2.5 percentage points higher than that of the previous year.
From the perspective of the future development trend, China's future social scrap resource increment will increase by 10 million tons per year. Under the strict requirements of environmental protection, the enthusiasm of steel scrap application in Chinese iron and steel enterprises has been greatly improved, and the proportion of scrap application has been significantly increased. Overall, China scrap industry development space is huge, the development prospects are bright. (From LGMI)