Posted on 14 Jun 2023
China's steel scrap supply from the scrapped car recycling market is likely to decrease further in June, mainly due to the expected lower operating rate among domestic car scrapping and dismantling enterprises, as well as the overall reduction in the availability of scrapped cars, according to Mysteel's latest survey.
China's automobile sales have been increasing on the back of the country's economic development and its central and local governments' series of stimulus policies to boost automobile consumption, Mysteel Global noted.
For example, China's automobile sales in May gained 27.9% from the same month last year to reach 2.38 million units, while production also rose 21.1% on year to 2.33 million units, according to the data released by the China Association of Automobile Manufactures.
As China's automobile count continues to soar, its scrapped car recycling market has played an increasingly significant role in the domestic steel scrap supply. The Chinese government provides that a vehicle should be sent to a qualified enterprise for dismantling and scrapping when it runs for 600,000 kilometers, Mysteel Global has learned.
Despite the great potential in the scrapped car recycling market, the actual steel scrap supply realized from the sector has been falling in May, with the total recycled cars among China's 41 car scrapping and dismantling enterprises edging down by around 8% on month to only 16,390 units, according to Mysteel's survey.
The main reason behind the reduction was car owners' low interest in sending their cars to dismantling factories, according to a Shanghai-based market watcher. "The scrapped car recycling market (in China) has not been fully industrialised, and the payback offered by the recycling plants is relatively low, which restrain car owners from scrapping their used cars," she explained.
Furthermore, as more car scrapping and dismantling enterprises get qualification from China's Ministry of Industry and Information Technology, competition among them has been rising when they vie for market share, resulting in market chaos and disrupting car recycling activities to some extent, Mysteel Global learned.
The decline in steel scrap supply from the scrapped car recycling market is likely to persist in June, Mysteel predicted. And the humid and hot weather in summer will further dampen outdoor scrapped car recycling and dismantling activities.
In addition, given the recent wavering steel scrap prices and domestic steelmakers' waning appetite for scrap due to their meager margins and the lower price competitiveness of scrap itself, most recycling and scrapping enterprises became cautious about production, with the overall operating rate among them hovering lower than the same period last year.
As of June 12, Mysteel's steel scrap price index reached Yuan 2,928.4/tonne ($409/t) and including the 13% VAT, down by a large Yuan 848.6/t compared to the same period last year, though Yuan 25.8/t higher on month, the data show.
Source:Mysteel Global
