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Scrap metal scarcity

Korean steel mills rush to secure metal scrap from abroad

POSCO plans to buy a stake in an overseas steel scrap company in its transition to low-carbon production

By Dec 20, 2021 (Gmt+09:00)

2 Min read

Dongkuk Steel Mill scrapyard in South Korea
Dongkuk Steel Mill scrapyard in South Korea


South Korean steelmakers, led by POSCO Co., are rolling up their sleeves to secure metal scrap as they are shifting into less carbon-intensive steel production, which uses steel scrap as a raw material. 

POSCO recently unveiled a plan to build both domestic and overseas bases to collect steel scrap, alongside a stake investment in a foreign metal scrap supplier, to stockpile a total of 4 million tons of recyclable steel. 

The world's fifth-largest steelmaker produces 40 million tons of molten metal annually. Recyclable steel accounted for 20% of the raw materials used in its furnaces this year, versus the previous year's 15%. It plans to increase the proportion to 30% by 2025. 

POSCO's move kept other electric furnace-based steel mill operators in South Korea alert to a further supply crunch of metal scrap, pushing them to draw up measures to ensure a stable supply of the raw material. Electric furnaces use steel scrap and coke from coal to produce steel.

Dongkuk Steel Mill Co. recently built a directly run scrapyard in Japan to gather metal scrap. Hyundai Steel Co., which operates both electric and blast furnaces,  recently bought a large-size scrapped ship for metal recycling.

South Korea is 80% self-sufficient for its steel scrap needs with an annual volume of 18 million tons, and imports 4 million to 6 million tons annually from the likes of Russia, Japan and the US.

But those exporting countries have implemented measures to limit exports, including imposing export taxes, driving steel scrap prices to a 13-year high last month.
(Courtesy of Hyundai Steel)
(Courtesy of Hyundai Steel)


PRICE REBOUND

Steel scrap prices have staged a rebound after a modest correction in the past few weeks, according to the industry sources on Dec. 20.

The average price of heavy melting scrap A, regarded as a benchmark indicator, was quoted at 572,000 won ($480) per ton in the second week of this month. Heavy melting scrap A breaks down into quality steel bars and H beam scrap.

The price is below the 13-year peak of 605,000 won hit in the first week of November, but still over 80% from the previous year's December average of 312,000 won.

Metal scrap is now widely used for the production of not only steel bars and beams for the construction industry, but also steel sheets and plates used for vehicles and vessels.

Write to Jung-hwan Hwang at jung@hankyung.com
Yeonhee Kim edited this article.
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