Domestic scrap iron (iron scrap) prices are on the rise, exceeding the 600,000 won per ton mark for the first time in 13 years. Domestic steel makers have started to secure scrap metal in Japan and Russia, paying more. On the 5th, scrap metal moved from home and abroad is piled up at the pier in Incheon’s North Port. Reporter Huh Moon-chan
The price of scrap metal (iron scrap) is on the rise, breaking through the 600,000 won per ton mark for the first time in 13 years. This is a phenomenon that occurred as the global steel industry significantly increased the use of scrap iron instead of iron ore to reduce carbon emissions. As China, Russia, Japan, etc. are trying to make scrap metal a strategic commodity, the possibility of a ‘supply crisis’ is emerging.
According to the steel industry on the 7th, the average price of ‘weight A’ scrap iron, which is the price standard for iron scrap, recorded 605,000 won per ton in the first week of this month. This is double the average of last December (312,000 won). The price of scrap metal, which had been moving sideways after exceeding 500,000 won per ton at the end of June, jumped 14% in the month of October. Weight A is a scrap iron composed of good reinforcing bars or H-beam pieces, and is a raw material used by domestic steel companies to operate electric furnaces.
It is the first time in 13 years since 2008 that the price of scrap metal has exceeded 600,000 won per ton. At that time, the price of scrap metal dropped sharply to 670,000 won per ton as China carried out a large-scale construction project ahead of the 2008 Beijing Olympics.
Industry analysts believe that the recent surge in scrap metal prices is due to structural changes in the steel industry, unlike in the past. As countries around the world demand emission reduction to achieve carbon neutrality goals, the steel industry is attempting to change the blast furnace (blast furnace) method of melting iron ore into coal to obtain molten iron. An industry official said, “If scrap iron, a recycled raw material, is added to the blast furnace instead of iron ore, carbon emissions are reduced by less than half.” Large steelmakers such as POSCO and China’s Baou Steel plan to increase the proportion of scrap iron used in molten iron production from the current 10% to 30% by 2025.
There is also a movement to turn scrap metal into a strategic commodity. The Eurasian Economic Union, led by Russia, has been pushing for a bill to ban the export of scrap metal from June. China, which banned imports of scrap until last year, resumed imports this year and started to secure supplies.
The impact of the rise in scrap metal prices is expected to affect overall domestic manufacturers. Until now, products made from recycled scrap steel have been used as construction materials such as reinforcing bars and sections, but experts predict that the use will expand to heavy plates for ships and steel plates for automobiles. An official from the steel industry said, “The proportion of scrap metal will increase to 50% in the long term, which can lower the cost competitiveness of the downstream industry.”
Structurally, a surge in demand is inevitable… Income is already over 700,000 won per ton
Leading to price hikes for rebar and section steel, it is likely to have an impact on construction, construction, and shipbuilding
Recently, people in charge of purchasing scrap metal in the domestic steel industry are in crisis. As scrap metal prices broke through the 600,000 won/ton level for the first time since 2008, competition to secure supplies intensified. Import prices from major scrap metal importers such as Japan and Russia have risen to over 700,000 won per ton, even with bulk carrier freight rates.
The reason that steelmakers entered the battle to secure scrap is because scrap has emerged as a key raw material that can reduce carbon emissions. As the steel industry is pointed out as the main culprit of greenhouse gas emissions, global steelmakers are increasing their use of scrap iron, a recycled raw material, instead of iron ore. As a shortage is expected due to a surge in demand, scrap metal producers such as Russia and Malaysia are raising barriers by restricting exports.
Carbon-neutral core raw material scrap iron
According to the steel industry on the 7th, domestic steel companies such as POSCO, Hyundai Steel, and Dongkuk Steel have started to secure scrap metal from Japan, Russia, etc. As competition from domestic companies continues, the import price of scrap iron from Japan is close to 70,000 yen (about 730,000 won) per ton, far exceeding the domestic price.
The reason domestic companies are paying more money to secure scrap metal, which has been treated as garbage, is because market demand has entered a structurally upswing phase. The self-sufficiency rate of domestic iron scrap is 85%, and about 4 to 6 million tons are imported annually from Russia, Japan, and the United States. It was determined that the increase would continue following the import price, which had already exceeded 700,000 won per ton.
The high price of scrap metal is the result of domestic and foreign steelmakers trying to reduce carbon emissions. It is facing criticism that the blast furnace (blast furnace) method in which molten iron is obtained by burning coke, a type of coal, along with iron ore, produces excessive carbon emissions. The steel industry has expanded electric furnaces that melt scrap iron with electric heat to make molten iron, and put scrap iron into blast furnaces instead of iron ore.
A representative example is that POSCO, which owns only blast furnaces, decided to increase the ratio of scrap iron used in blast furnaces from 15% last year to 20% this year and to 30% by 2025. An official from the steel industry said, “Global steel companies such as Nippon Steel and ArcelorMittal are also continuing to expand their electric furnaces.
‘Upgrade’ to strategic goods due to supply restrictions
As the demand for scrap metal is rapidly increasing while the supply is limited, scrap metal is becoming a strategic commodity. The Eurasian Economic Union, established by Russia to oppose the European Union (EU), has been discussing the introduction of a bill to ban the export of scrap since last June. Export tariffs applied to scrap metal were raised from 15 euros per ton to 70 euros per ton in June.
Malaysia also introduced a 15% export tax on scrap this year. Although the US and Japan have not yet begun to regulate their exports, the industry believes that these countries will also take measures to secure domestic demand. For general minerals such as iron ore, mining can be increased according to the increase in demand, but scrap iron is completely dependent on the supply of discarded home appliances, automobiles, ships, and building materials.
It is primarily the construction industry that is being hit directly by the rise of scrap metal. Hyundai Steel raised the standard price for rebar construction (SD400) by 28,000 won this month to 956,000 won per ton. Dongkuk Steel also raised the price of section steel by 30,000 to 50,000 won from this month.
However, it is expected that the rise in scrap metal prices will have a far-reaching effect not only on construction, but also on manufacturers that use steel products such as automobiles, shipbuilding, and electronics. In the past, scrap iron was considered as a raw material for electric furnaces that produce steel for construction such as rebar and section steel, but industry analysts believe that the proportion of blast furnaces that mainly produce hot rolled steel and thick plates will continue to increase in the future. A POSCO official said, “In the future, we will not be able to discuss the cost of steel products without excluding scrap prices.
It is also pointed out that the government needs to adjust the rate of carbon neutrality. An official from a steelmaking industry said, “Korea’s dependence on scrap iron imports will increase, but there is no alternative.
Reporter Hwang Jung-hwan jung@hankyung.com
