Scrap steel prices are on the rise in the context that China needs more supply to improve air quality and control steel output in 2021.

According to S&P Global Platts, China’s imported scrap steel price is currently quite high. On October 1, the price of this material reached about 598 USD/ton, up from the September average of 576 USD/ton.

The price of scrap steel eligible for export to China may continue to rise higher, helping the scrap market to be competitive with iron ore. Compared to August, the price of iron ore 62% Fe has decreased by 25% in September this year.

In China, the ratio between the price of imported scrap steel and the price of iron ore increased to 5.11:1 on October 1. The ratio falls around 4.99:1 at the end of September and the August average is around 4.89:1.

While China’s imported iron ore prices remained low, the price of imported coke hit a new record last month.

According to S&P Global Platss, Beijing’s restrictions on steel production and higher coking coal prices have depressed iron ore demand. In contrast, environmental policies increase the attractiveness of scrap steel, pig iron and hot briquetting sponge (HBI).

Similar to import prices, China’s domestic delivery of scrap steel is also anchored at a high level, even as iron ore prices plunge. The use of scrap steel in large quantities can help steel manufacturers and users significantly reduce greenhouse gas emissions as well as save more fuel.

China is on track to bring 2021 crude steel production below 2020 levels, according to S&P Global Platts. This will be the first time since 2016 that the country’s steel production has declined.

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