Economy, Business And Markets

Scrap Metal Shortages Linger

Scrap Metal Shortages LingerScrap Metal Shortages Linger

The shortage of more than 1.5 million metric tons of scrap iron per year has forced many private sector steel plants to shut down their furnaces several times a week, Fooladnews reported.

Adding to the problems facing the country’s steel sector including low tariffs on imported steel, stagnation in the market, and the shortage of key raw materials such as iron ore pellets; the sector is finding itself amidst a critical condition in terms of supplying sufficient amounts of scrap iron by which the steel manufacturers can make significant savings on energy, raw materials and recycling.

Currently, some 4 million metric tons of scrap iron is annually required by domestic steelmakers to meet the growing needs of the industry. According to Fooladnews, some government officials have not yet realized the value of scrap metal and how profitable it can be if a systematic procedure is adopted to regularly supply steel producers with the vital raw material.

Statistics from the World Steel Association show that Iran exported only 24,000 metric tons of scrap iron during the entire 2013. This as the country has a poor performance in terms of importing scrap iron. Turkey, for instance, imported 19 million metric tons of scrap iron in 2013 out of the global amount of 96,263,000 million metric tons. Iran, for its part, imported only 110,000 tons of scrap iron during the Iranian calendar year 1390, which ended March 20, 2012. The country’s import during a 20-year period was 1.7 million metric tons, according to the World Steel Association.    

There are several reasons behind the high demand and low supply. The slowdown in the construction sector, especially in capital projects, during the past two years was a serious blow to the steel manufacturing sector. Now another challenge is that many buildings are being renovated and as a consequence the scrap iron in their structure is not injected into steel production chain. Moreover, during the past decade, manufacturers of direct-reduced iron (DRI), also known as sponge iron, have been buying scrap iron in order to meet 15% of their input needs. Such a trend increased the consumption of scrap iron and rapidly stimulated imports.  

 Serious Threats

Experts believe the scrap shortage in Iran is a serious threat to the domestic steel industry as the current annual production of steel, hardly reaching 20 million metric tons, requires a far bigger supply of the used material.

Scrap is recyclable material left over in the course of manufacturing and consumption of auto parts, building materials etc. It is also supplied through ship wreckage, rusting trains, old vehicles, and torn down dilapidated buildings as well as surplus materials.

Steel manufacturers can make significant savings by using scrap; they can save on energy, raw materials and recycling. Using scrap also helps with reducing air pollution, water consumption, and water pollution. For steelmakers, every ton of new steel made from scrap iron saves 1,115 kilograms of iron ore.

Steel market experts believe the best way to develop an integrated system for supplying scrap iron could be sought in the Iran Mercantile Exchange (IME). Scrap iron prices have significantly soared over the past few years, while the prices of steel products have not experienced a parallel growth. The commodity market could secure the supply of scrap iron for the steel industry by harnessing the price fluctuations. The IME could also help create more transparency in the market, both in terms of prices and trade volume.

The export tariff levied on scrap iron is 80% which is said to have been imposed in an attempt to slow down exports. This is while India and Pakistan are considered great potential customers for the recyclable material.

If the private sector could establish an integrated and organized system to supply scrap metal, which is now domestically supplied through traditional collecting, separating and smelting methods, the country will not only be able to stop importing it from the Commonwealth of Independent States (CIS) like Ukraine, but it could turn into a major supplier of scrap metal for India and Pakistan.

Currently, there is no company or association responsible for collecting and sorting scrap iron in the country and Tehran Scrap Iron Cooperative only buys scrap metal in the suburbs of the capital and feeds the steel manufacturers, said Ahmad Azad, the secretary of Tehran Iron and Steel Union.