MNI: China Looks To Steel Scrap As Iron Ore Diversifier

China’s bid to use more scrap steel could reduce iron-ore consumption by a greater magnitude than new import volumes expected from high purity Guinean mines set to open later this year, advisors and analysts told MNI.

Beijing views iron-ore as its most significant strategic-materials risk, a government advisor told MNI, noting Australia accounted for about 60% of the record 1.3 billion tonnes imported in 2024.

However, China could reduce iron-ore demand by as much as 526 million tonnes per annum by 2030 should scrap steel recycling reach 350 million tonnes annually, said Alyssa Ren, senior ferrous analyst at Mysteel in Shanghai, pointing to the China Scrap Iron and Steel Association’s 2022 forecast.

While potentially over-optimistic given the subsequent property downturn, Ren noted scrap levels could still reach 300-320 million by the end of the decade. China recycled 252 million tonnes in 2024, which replaced about 378 million tonnes of iron ore, Ren highlighted, though cautioned ore purity variations made conversions rough estimates at best.

DIVERSIFIED SUPPLY

Ore imported from new mines in Guinea’s Simandou region at the end of this year represents the first step for China to diversify its supply a reasonable amount away from Australia and Brazil, a senior mining industry economist told MNI. 

However, he downplayed recent statements from Guinean’ Mines and Geology Minister Bouna Sylla that output would reach full capacity of 120 million tonnes by 2027, noting output would more likely reach about half that level in that year, before slowly ramping up through the early 2030s.

Several safety incidents have reportedly impacted the mine’s preparations to launch production this year, according to mainstream media. 

The scale of Simandou’s high purity 65% iron-ore make the project better placed than China’s previous efforts in South America and Africa, which lacked scale and quality, said Lauren Johnston, associate professor at the China Studies Centre, University of Sydney.

AUSTRALIA

Australian iron-ore as a proportion of China’s total consumption has remained firm at about 60-65% over the past several years as crude steel production surprised consensus by more than 100 million tonnes in the early 2020s, the economist said. 

“With efforts to develop domestic output stuck at around 300 million tonnes and Brazilian supply underperforming since the Feijão iron-ore mine Brumadinho dam disaster in January 2019, Beijing needed high-cost supply to fill the gap," he added.