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Japan's steel scrap exports under pressure

Quality issues, tougher domestic rules and import restrictions in China eat into volume

The Chinese government is cracking down on recyclers that inadequately process and sort miscellaneous scrap steel.   © AP

TOKYO -- Exports of steel scrap from Japan are under pressure as quality control problems have alienated customers. Toughened regulations in Japan and import restrictions by China are already affecting exports of low-quality scrap, while a major user in South Korea is starting to reduce procurement of benchmark scrap generated in Japan.  

Steel scrap materials are acquired from such sources as construction sites and scrapped automobiles and are used by electric furnace steelmakers for steel production. Of the 80 million tons traded around the world every year, Japan exports 8 million tons, or roughly 20% of the amount generated domestically. In other words, exports from Japan account for 10% of the global volume of trade.  

Japan recently revised its waste management law after a spate of fires at scrapyards. The revised law, which came into force in April, toughens regulations for the management of steel scrap mixed with nonferrous metals, plastics and other items. As a result, the cost of managing and exporting such "miscellaneous steel scrap" has risen at trading houses and other exporters.

While sorting by hand is the best way to remove nonferrous metals and other impurities from steel scrap, manpower expenses are rising amid a deepening shortage of labor in Japan.

As demand for copper, lead, tin and other nonferrous metals increased in China in around 2000, exports of miscellaneous steel scrap from Japan to China began. Recently, however, the situation in China has been changing.

The Chinese government is cracking down on recycling businesses that inadequately process and sort miscellaneous scrap, as part of its priority policy of promoting environmental protection. With import restrictions introduced in stages, exports of miscellaneous steel scrap from Japan to China in the January-July period of this year more than halved from a year earlier to just over 40,000 tons.

Japan revised its waste management law due to a spate of fires at scrapyards.

In Japan, there have been cases in which miscellaneous scrap iron has slipped into high-quality scrap. "We may lose trust in South Korea, Vietnam and other markets unless we maintain quality," said Taro Hagiwara, head of the office in charge of scrap iron at major Japanese trading house Mitsui & Co. 

Changes are also occurring in South Korea, the largest export market for scrap iron from Japan. Since around July, for example, Hyundai Steel has refrained from quoting prices for the benchmark Japanese scrap known as H2.

The leading South Korean steelmaker has been holding off on procurement since a drop in the reputation of H2 scrap for inclusion in miscellaneous scrap and instead has become more inclined to use high-end scrap, analysts said.

Of steel scrap exports from Japan, 70% to 80% go to South Korea, China and Taiwan. Exporters need to expand sales routes in other markets, such as India and Indonesia, while maintaining the quality of scrap.

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