The information below may be 1 year old. with current coking coal prices scrap steel is gaining advantage.
So far, the scrap supply has not played any significant role in the Chinese steel industry. Right now, the majority of the steel in China is produced using blast furnaces. The current proportion of scrap used in blast furnaces is just 8% while according to global standards, the scrap usage in blast furnaces can be as high as 20%. This means in the short term, scrap usage can increase in China without any need for building electric arc furnaces.
BHP has forecasted a rise in China’s scrap ratio to around 20% by 2020 and to around 30%–39% by 2030.
RIO also expects scrap to displace iron ore to some extent as Chinese scrap triples over the next 15 years. The total increase in obsolete scrap should displace ~130 million tons of iron ore demand by 2030.
Decision to use scrap versus iron ore
The decision for using scrap versus iron ore to produce steel depends upon the relative prices. According to Mineral Value Service, “The price to a Chinese coastal mill of producing one tonne of pig iron (including cost and freight of all iron ores, coking coals, sintering and pelletizing costs) is currently higher than benchmark scrap price (Platts Heavy Delivered mill Jiangsu Scrap) inside the country.”
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