Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Major Chinese mills like Jiangsu and Rizhao Steel could import around 1mn mt of ferrous scrap in 2021. Being a preferred source, Japanese ferrous scrap prices are expected to be supported by Chinese buying, while exports from the US and Australian yards could also rise.


The Chinese government is set to implement a new steel scrap policy effective from Jan 1, as per a Dec 23 release. The new policy will discontinue 2pc import duty on ferrous scrap and reinstate most-favoured-nation (MFN) policy rates from January. As per the draft policy, steel scrap listed under the HS codes 72042100 (stainless steel scrap), 72042900 (other alloy steel scrap), 72044900 (other steel scrap), 72045000 (scrap ingot for re-melting) will be subject to an MFN tax rate of 0pc from the present 2pc. However, those forms of scrap under HS codes 72041000 (casting iron scrap), 72043000 (tin-coated steel scrap) and 72044100 (scrap produced in machining) will face an MFN rate of 2pc in order to implement the “Law on the Prevention and Control of Environmental Pollution by Solid Wastes. The new policy also abolish the import quotas and restrictions on imports of “solid wastes” including metal scrap into China which is in place The government is also considering waiving duties on imports of non-alloyed nickel, energy and other commodities.  


The contractual tariff rate is 0pc for all steel scrap produced in the following countries or regions: Asia Pacific region, Chile, Pakistan, New Zealand, Peru, Costa Rica, Switzerland, Iceland, Australia, South Korea, Georgia and Mauritius. The contractual tariff on South Korea-origin HS code 72044100 (scrap produced in machining) would be 0.6pc, Davis Index understands.


Chinese mills might also consider buying bulk ferrous scrap cargoes as per price viability. However, experts believe that it would take at least the first quarter of 2021 to see the actual impact on the global trade flows.


Japanese ferrous scrap prices could rise on Chinese buying in 2021. Other destinations like the US and Australia could see more exports to China, said market participants. Major ferrous scrap consumers in China including Jiangsu Steel and Rizhao Steel are aiming to import around 1mn mt of ferrous scrap in 2021.


Global ferrous scrap prices have gained over $100/mt in less than a month and there is a gap of around CNY500/mt ($77/mt) between the domestic equivalent of HMS 1&2 (80:20) and imported scrap. Chinese mills are likely to book more higher-grade scrap and could prefer domestic HMS to blend in the electric arc furnaces. On Thursday, domestic HMS 8mm traded at CNY3,000-3,100/mt ($460-475/mt) delivered Jiangsu province plant and above including 13pc VAT. While supplier could offer imported scrap in bulk at above $500-520/mt cfr China, said a steelmaker, stating this difference of $50-70/mt makes it an expensive option for mills.


Amid an acute shortage of ferrous scrap and containers, globally, few buyers in east Asia are shifting their focus on alternatives like pig iron and DRI, pushing their prices up significantly.



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