Urbanization and Scrap Metal Potential to Change Resource Consumption

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What is it?
Why is it important?
References

What is it?

In 2012, China produced 5.6 million tonnes of copper, of which 2.75 million tonnes was made from scrap.¹ A similar level of reuse in China is forecast for steel with 20% of steel production to come from scrap by 2015. Steel scrap recycling has wide-ranging economic and environmental impacts. Recycled steel is more cost effective and has a smaller carbon footprint than iron ore extraction. As the price of scrap and iron ore are correlated, the movement of one will affect the other. In 2010, Chinese imports of scrap fell dramatically as demand was met internally. There may be a decrease in iron ore demand as a result of metal reuse and Chinese industries moving up the value chain.

Why is it important?

Chinese consumption of iron ore is beginning to slacken – a trend that is likely to continue for the next decade. China’s projected supply of scrap metal in the future is affecting present day iron ore investment decisions.² Plans by India to re-enter the iron ore export market to boost foreign exchange reserves will increase downward pressure on prices. In addition, it is estimated that China already has an excess production capacity of 200 million tonnes of steel per year. ³This would appear to indicate that China’s steel demand is peaking much sooner than the previously predicted peak of 2030.⁴

As the world’s largest iron ore steel producer and scrap metal importer, Chinese demand can influence the global price of steel and hence the cost of construction. In addition, the emergence of more efficient recycling technologies and sustainable metals management (industrial ecology) will ensure metal quality can be retained in the recycling process, further reducing the overall demand for iron ore.

References

1. Minter, A. “How China Profits from our Junk.” The Atlantic. November 2013. http://www.theatlantic.com/china/archive/2013/11/how-china-profits-from-our-junk/281044/(link is external)
2. “Keep an eye on India and China, says Standard Bank.” MiningWeekly.com. December 2013. http://www.miningweekly.com/article/keep-an-eye-on-india-and-china-banking-firm-2013-12-20(link is external)
3. “Heavenly iron-ore prices bound for purgatory as China reforms.” The Sydney Morning Herald. July 2013. http://www.smh.com.au/business/world-business/heavenly-ironore-prices-bound-for-purgatory-as-china-reforms-20130730-2qvoz.html#ixzz2n2pSYFvE(link is external)
4. Ibid.