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Why is China willing to import iron ore at a high price and not recycle scrap?

2022-12-05

More and more attention is now being paid to our steelmaking industry, with some directly questioning why we have to pay high prices to import iron ore from abroad. Wouldn't it be more cost effective to recycle steel scrap? 
According to statistics from the relevant authorities, China's demand for iron ore is very high, and in 2021 China imported a total of 1.124 billion tonnes of iron ore, and for the first time the import value exceeded 1 trillion. What is even more surprising is that last year alone China's total imports amounted to roughly 17.4 trillion yuan, while iron ore accounted for nearly 7%.
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In contrast, the total global trade in steel scrap will add up to only about 100 million tonnes in 2021, while China imports at most about 10 million tonnes a year. In the process of making steel, some end-of-life material will inevitably be produced.
But in steelmaking as long as the element iron is available, that is to say the use of iron ore and scrap steel can actually make steel.
However, the raw materials used in steelmaking are different and so are the processes.
For example, if a steelmaking furnace has always used iron ore to make steel, but suddenly changes it to scrap steel and throws it in, the quality of the steel made will certainly be difficult to guarantee. The reason is that when making steel, any small detail can make the whole batch of steel fail.
Of course it is not impossible to use scrap steel to make steel, but the vast majority of the steel industry in China uses traditional blast furnace steelmaking, which is the main raw material used in steelmaking is iron ore. The use of scrap steel is a new type of electric furnace short process steelmaking, however, this electric furnace steel in China's steel industry accounted for only about 10%, so there is no way to use scrap in large quantities.
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If you look at some other developed countries, the US is able to produce 70% of its steel in electric furnaces, and some countries in the EU can reach around 42%. The reason for the low proportion of this approach in our country is actually because our steelmaking industry started a little later, especially in the electric furnace steel, and this has caused a large amount of scrap in our country itself is now temporarily not available to be reused.
In addition, the overall process of making steel from scrap is quite tedious, so don't look at the raw materials used to save a lot of costs, but also in the refining process to pay a lot. China is also in the development stage in this field, so the cost is not much lower than using iron ore directly.
In addition to the refining process, of course, the production of scrap is also a problem. This is because the steel scrap we are talking about is not the leftover scrap from the production process, but rather used steel equipment that has been used for a long time and can no longer be used. Normally, a steel plant has a relatively long service life.
Therefore, the production of steel scrap is actually lower than the production of natural ore. So the total amount of steel scrap that can be traded globally each year is small.
Compared to other developed countries, China's steel industry started late and most of the equipment has not yet reached the end of its useful life, so there is not a lot of steel scrap that can be recycled, and if we rely on that scrap alone to make steel, there is no way to meet our annual demand for steel.
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