scrap consumption to reach over 631 million tons
According to a report released by Global Industry
Analysts, Inc. (GIA), the global steel scrap market is projected
to reach 631.5 million tons by 2015, driven by the rise in steel
production following a lull in steel industry operations due
to the global recession. Improving sales in the automobile industry
and enhanced construction activity, the hardest hit segments
due to recession, are expected to fuel demand for scrap steel.
Steel scrap’s favorable impact on the environment is also expected
to boost the consumption levels in steel making industry.
The scrap steel industry has been significantly
affected by the global economic meltdown, which led to a steep
decline in the global supply of scrap steel. Due to the economic
slowdown, consumers across the world delayed purchasing decisions
related to new cars and home renovation, which constitute the
leading sources of scrap steel. The decline in the recycling
activity during the economic recession also affected the supply
of steel scrap. However, the economic recovery of developed countries
is likely to ensure greater availability of steel scrap. As western
economies have traditionally driven the scrap arisings, decline
in steel making operations affects the global supply levels of
The anticipated recovery of the global economy is also expected
to favor increased demand for steel scrap. Rising demand for
raw materials used in steel making industry from rapidly expanding
emerging markets such as China, India and Brazil is expected
to fuel demand for steel scrap. Establishment and operational
commencement of new steel mills using electric arc furnace technology
is also expected to fuel demand for steel scrap.
A major challenge facing the steel scrap market is the imposition
of restrictions on export of steel scrap by several countries,
which is expected to adversely affect countries that rely exclusively
on imports for meeting domestic requirements. Such restrictions
generally take the form of export prohibitions, taxes, administrative
measures and export quotas. The restrictions not only lead to
a price rise in the global markets, but also provide unfair competitive
advantage to domestic manufacturers and enhance cost of production.
Steel scrap is the key raw material used by electric arc furnaces
for steel production. More than 55 percent of steel produced
in the European Union employs steel scrap as the raw material.
The European steel industry is witnessing lower volumes of steel
production, lower scrap consumption and lower levels of new scrap
arising. European companies using electric arc furnace technology,
which uses steel scrap as the primary raw material for the manufacture
of steel, accounted for over 40 percent of all steel production.
China leads the world market in the production of steel. However,
the country consumes a relatively smaller proportion of scrap
steel for steel production. Robust domestic demand along with
strong economic development has been the driving force behind
the growth in the Chinese steel industry. However, the sector
witnessed turbulent times in 2008 and 2009 with a steep decline
in external consumption, leading to decrease in Chinese export
of steel. The adverse economic conditions and the subsequent
decline in steel demand led to cuts in the production at several
domestic steel mills, resulting in substantial decline in the
steel output, which is also evident in the decreased consumption
of steel scrap.