Steel scrap supply expected to ease iron ore consumption

China's consumption of iron ore may reduce as its metal scrap supply increases in the future, but steel scrap use this year is expected to reduce because of policy and financial reasons, experts say.

Metal scrap, which can be used as a substitute for iron ore, was a hot topic at a raw material conference - the 13th China International Steel and Raw Materials Conference held in Qingdao, Shandong province.

Several experts and industrial insiders gave presentations on its importance for China's iron ore and steel market, and prices.

"China's steel products stock volume has doubled that of the United State which owns about 3 billion metric tons," said Wang Xiaoqi, vice chairman of the China Iron Ore and Steel Association.

He said since China has a huge steel stock volume, steel scrap has much potential in the future to reduce iron ore consumption growth.

According to Wang, China has consumed about 6 billion tons of steel since the country's establishment and, by the end of 2011, the stock volume of steel products in China reached 5.2 billion tons.

However, Li Shubin, executive vice-chairman and secretary-general of the China Association of Metalscrap Utilization, expected domestic steel mills would not consume much steel scrap this year because the government's tax preference policies for steel scrap use were suspended in 2012.

"The weak market for steel scrap will continue in 2013," Liu said.

In the first half, the major steel companies consumed 21.57 million tons, a 1.5 million ton reduction from the same period last year, according to the association.

However, Liu is optimistic about the future for steel scrap.

"In the long-term, the country's ongoing urbanization process will increase new steel demand which will definitely drive the steel scrap market during the 13th Five-Year-Plan period," Liu said.