Morgan Stanley: Steel Industry Scrap Demand Witnessed Reversal

SEATTLE (Scrap Monster): Leading American multinational investment bank, Morgan Stanley observed that scrap consumption by Chinese steel industry has failed to witness improvement.

According to analysts, the country is seen experiencing a reversal in scrap usage. The scrap utilization levels are currently at the lowest level in almost six years. Consequently, the previously stated goal of achieving 15% share of total steel production by EAF routes by 2025 looks optimistic.

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The cyclical headwinds leading to the lower-than-expected scrap utilization are unlikely to witness any major change in the immediate near term. As a result, the use of scrap may see only slight to moderate increase in 2024. This, on the other hand, would significantly benefit alternative steelmaking raw materials such as coking coking coal and iron ore, Morgan Stanley said.

The steelmakers will promote use of scrap in oxygen-converter steelmaking, only if the process returns profits to them. In the current situation, the profits have been showing a declining trend. The EAF steel production has been badly impacted by notable dip in real estate market.

Incidentally, Chinese steel industry recorded 1.019 billion tons of steel production in 2023, marginally higher from the prior year.