Chinese demand among factors in ferrous rise

Ferrous scrap prices have risen to some of their highest levels for more than seven years but are now edging down.

Material for the powerful shredder at Alexandra Dock on part of the large concreted area

The rise over the last few weeks of 2020 and the first week of the New Year has been seen against a backdrop of low volumes of material in the supply chain, with strengthening demand for steel products in China which it imports from other nations.

One of the UK’s leading experts on the sector, David Sheppard, ferrous sales manager at EMR, explained how he saw in the increased ferrous scrap prices a due to a coalescence of factors.

EMR is a major exporter of ferrous material

David Sheppard said: “Most important, we believe, is China’s relatively quick exit from the Covid lockdown and subsequent Chinese Government stimulus measures to support its economy. This has created significant demand for steel against the backdrop of an already depleted supply chain, where China had already been sourcing significant quantities of pig iron and billets compared to 2019 owing to growing environmental pressures of producing steel via blast furnace, plus BOF route and until recently the prohibition of imported scrap.”


Mr Sheppard continued: “Similarly, as the rest of the world started to get back to work, also supported by Government stimulus measures, there has been a requirement for restocking of steel generally. Returning from very low levels to normal demand in such a relatively short space of time has allowed steel prices, supported by raw materials prices, to increase to a new trading range.  Strong demand from China for steel has opened up the market generally in the Far East for finished steel products to be exported there in more healthy volumes from some of the big steel exporting countries such as Turkey.”

“As the rest of the World started to get back to work.. there has been a requirement for restocking of steel”

David Sheppard, EMR

And, with China now allowing some specific materials in (see story), Mr Sheppard explained that China has not yet started growing its scrap imports. “This is largely because there is now a gap between international scrap trading prices and their domestic prices. Nevertheless, trial deals are being made and as exporters and importers get accustomed to the new quality standards, this pricing gap will no doubt adjust, adding another source of demand to support scrap prices, moving forward.”


The British Metals Recycling Association told “BMRA believes that the current buoyancy of the ferrous market is likely due to a convergence of several factors. It said that “with supply chains across the world restocking following COVID-19, supported by Government stimulus measures, demand for scrap has increased everywhere.

“This effect is magnified in China by an increase in imports of pig iron and billets, which is linked to environmental pressures within China on blast furnace operations. Moreover, China has reclassified ferrous scrap as a recyclable resource to feed its growing EAF capacity. As a result, prices for iron ore are surging and, as the price of scrap is inextricably linked to the price of steel, we have naturally seen corresponding increase.”

In Rotherham, Liberty Steel has announced a £60m investment at its Rotherham site

UK investment

The increasing demand for ferrous scrap is in part down to a global resurgence in the electric arc sector which uses scrap alone. In the UK, in December 2020 producer Liberty Steel Group announced investments at its South Yorkshire Greensteel production hub at Rotherham to supply the transport, defence, and construction sectors as part of the UK government’s ‘Build Back Better’ plan. Liberty said that the investments, totalling more than £60 million, will remove production bottlenecks at its electric arc furnace and small bloom caster in Rotherham, helping the business to double existing steel output to 1 million tonnes per annum.


Metal recyclers told this week that while there have been substantial rises in prices,  at the same time there is a substantial level of caution in the market with expectations for reductions in the second half of the month. One remarked: “maybe we’re even seeing our own ‘Bitcoin’ bubble.”

However, others say they expect prices to be firmer than last year because of stronger demand in China and south east Asia impacting on the global market. “Much depends on the Covid situation and whether it actually reduces scrap volumes in some countries,” was another comment.

And, in terms of volumes, one merchant in southern England said that there was a shortage of good quality light iron and that quality issues remained, with poorer quality material being offered because suppliers were “clearing everything out”.

‘Massive market’

Peter Mathews

Metals recycling industry veteran and a past convention chairman of the Bureau of International Recycling, Peter Mathews of Black Country Metals said he thought the higher prices reflected that there had been a lag in the market and that they had come about because of the need to satisfy demand. “Customers are restocking and there are signs of some price reductions but perhaps more stability after that. We have to remember that China is a massive market and while they are collecting more scrap internally as they want to be self-sufficient, they still have to import new product. At present they are nowhere near being self-sufficient.”

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