Global ferrous scrap consumption in crude steel-making drops 7% in CY22

Global ferrous scrap consumption in crude steel-making dropped around 7% to 610 million tonnes (mnt) in calendar year 2022 (CY22), as per SteelMint's data. In 2021, the same was at 654 mnt.

This dip is surprising against the backdrop of a world where steel mills are proactively looking to adopt green methods of manufacturing.

The total share of ferrous scrap in crude steel-making was at 32% last calendar.

The countries which are the top consumers of scrap are China with 225 mnt, EU (78 mnt) the US (55 mnt), and Turkey and Japan with 30 mnt each.

Amongst the top consuming nations, Turkey had the second-highest share of scrap in steelmaking, at 85%.

Why did global ferrous scrap consumption drop despite decarb drive?

Drop in global crude steel production: The key reason is the decline in crude steel production globally. The war between Russia and Ukraine had wide-ranging ramifications in the form of escalated energy prices. The energy crisis fuelled an inflation which, in turn, led to a drop in steel end-user demand in the European Union. Overall, global crude steel production dropped 4% to 1,878 mnt in 2022 against 1,960 mnt in the year before. The share of the electric arc furnaces (EAFs) in steel-making dropped 5% y-o-y in 2022. Since EAFs are the major users of ferrous scrap, a drop in their production contributed majorly to the overall reduction in scrap consumption.

China's scrap generation drops: China's share of ferrous scrap in crude steel production remained more or less stable y-o-y last year at 225 mnt as against 226 mnt in 2021. However, its ferrous scrap generation, which had been steadily rising since the past few years, saw a 10 mnt or 4% y-o-y dip to 260 mnt from 270 mnt in 2021 because of the Covid surge as well as the severe winter which disrupts logistics movements.

That apart, China's crude steel production inched down 2% y-o-y from 1,033 mnt in 2021 to 1,012 mnt in 2022 which also dragged down the overall scrap usage. The fall in output is in keeping with China's decarbonization plans of carbon peaking by 2030 and net zero by 2060.

Turkey's crude steel production drops 13%: Turkey is the largest importer of ferrous scrap globally. But its ferrous scrap consumption decreased by 5 mnt to 30 mnt last year from 35 mnt in the year before. This was mainly a war spin-off. The high energy prices in Europe, including in Turkey, led to a drop in crude steel production by 13%. It has an overwhelming 72% share of EAFs in steel-making and thus the production drop naturally pulled down scrap intake. Secondly, not only did domestic demand drop, demand from the EU for Turkey's value-added flat steels also declined sharply due to the energy inflation, warranting a drop in crude steel output.

South Asia: Bangladesh, which depends fully on EAF-steel-making, faced challenges in the form of sliding currency, depleted foreign exchange reserves and the resultant caps on opening new LC accounts by importers. Its crude steel production dipped by 1 mnt y-o-y to 5 mnt last year. Pakistan too has not fared well in terms of scrap consumption.

India, on the other hand, is the only country which bucked the trend, with increase in crude steel production and 25.9 mnt of scrap consumption last calendar, becoming the second-highest scrap importer after Turkey.

Outlook

Ferrous scrap is becoming a coveted commodity with countries keen to meet their decarbonization goals. Most are bringing in legislation to enable them to keep the scrap they generate within their own shores for domestic use.

Thus, SteelMint, foresees, in the long run, the volume of seaborne ferrous scrap trade, currently at around 288 mnt, will fall further from here. Concomitantly, the share of scrap consumption in steel-making will eventually rise globally from the current 32%.