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What is steel scrap? what is it used for?

Classification of scrap iron and steel

Scrap produced in the production process of steel mills, as well as materials in scrapped equipment and components, whose components are steel or pig iron, are collectively referred to as scrap steel.

According to the difference of output sources, scrap steel/iron can be roughly divided into “self-produced scrap”, “processing scrap”, “depreciation scrap” and “social scrap”.

Self-produced scrap steel, also known as “returned scrap” or “recycled scrap,” mainly comes from the scraps generated during the process of black metal smelting and steelmaking. The production of self-produced scrap steel depends on the steel output and the yield of steel products. In other words, the higher the crude steel output and the higher the yield rate, the more self-produced scrap steel will be generated. According to data from 2020, China’s crude steel yield rate is approximately 96%. Self-produced scrap steel is usually recycled internally within steel mills and is less likely to flow into the market. In recent years, the supply of self-produced scrap steel has been increasing year by year along with China’s crude steel production. In 2021, China’s production of self-produced scrap steel was approximately 60 million tons, accounting for approximately 24% of the total supply of scrap steel in the country.

Processed scrap steel, also known as “short-term scrap,” mainly comes from the cold and hot processing and mechanical processing stages during black metal smelting. It consists mostly of stamped scraps, cuttings, and end pieces. Due to its high quality and average grade, processed scrap steel can typically be returned to the furnace within a short period. The production of processed scrap steel depends on the steel consumption and the yield of processing. In other words, the larger the steel consumption and the lower the processing yield, the more processed scrap steel will be produced. In 2021, China’s production of processed scrap steel was approximately 50 million tons, accounting for approximately 17% of the total supply of scrap steel in the country.

Depreciation scrap steel, also known as “long-term scrap,” mainly comes from the scrap formed after a certain period of use of various metal products, equipment, and structural buildings. Typical sources include scrapped automobiles, machinery and equipment, airplanes, ships, containers, and steel structural buildings. The production of depreciation scrap steel depends on the accumulation of steel and the recycling cycle of steel products. For example, the average lifespan of a traditional automobile before scrapping is about 15 years, while the normal service life of steel structural engineering buildings is around 50 years. Since 2017, the supply of depreciation scrap steel in China has been rapidly increasing, achieving nearly a doubling of growth within a five-year period. In 2021, China’s production of depreciation scrap steel was approximately 170 million tons, accounting for approximately 60% of the total supply of scrap steel in the country.

Social scrap steel, also known as “garbage scrap,” mainly comes from the waste and discarded steel produced in daily life, such as tin cans, furniture, and utensils. It also includes accumulated scrap steel blocks and salvaged sunken ships, making its sources quite diverse. Due to the difficulties in recycling and the challenges in controlling the quality (as social scrap steel contains complex chemical compositions), the proportion of social scrap steel in the total supply of scrap steel is relatively small.

In summary, the characteristics of self-produced scrap steel and processed scrap steel are as follows: Under relatively stable steelmaking and steel processing technologies, the supply is relatively steady due to the lock-in of steel production and demand. Moreover, these types of scrap steel have strong quality control, allowing for internal recycling or quick return to the furnace as raw materials. Depreciation scrap steel has a large annual production volume, with quality control difficulties higher than self-produced scrap steel and processed scrap steel. However, due to better recycling sources, its quality is far superior to social scrap steel, making it expected to be the main growth point in China’s scrap steel supply. On the other hand, social scrap steel is relatively less significant, as it faces major drawbacks in terms of recycling difficulty and quality control.

According to the Chinese national standard for scrap steel, “Ferrous Scrap GB/T 4223-2017,” scrap steel is classified into two major categories: scrap iron and scrap steel. Scrap steel that cannot be used for its original purpose and can be used for smelting and recycling purposes is classified as smelting-grade scrap steel. Scrap steel products that cannot be used for their original purpose and are not suitable for smelting and recycling or rolling into steel products for reuse are classified as non-smelting-grade scrap steel. The Chinese standard provides detailed classification only for smelting-grade scrap steel.

  1. Smelting-grade scrap iron: The carbon content of scrap iron is generally greater than 2%. Class I scrap iron has sulfur content not exceeding 0.07% and phosphorus content not exceeding 0.4%. Class II scrap iron and alloy scrap iron have sulfur content not exceeding 0.12% and phosphorus content not exceeding 1%. The iron content in blast furnace burden materials is not less than 65%. According to weight and shape, it is classified as specified in Table 1.
  2. Smelting-grade scrap steel: The carbon content of scrap steel is generally less than 2%, and the sulfur and phosphorus content is generally not greater than 0.05%. In non-alloy scrap steel, residual elements should meet the following requirements: nickel not exceeding 0.3%, chromium not exceeding 0.3%, and copper not exceeding 0.3%. Except for manganese and silicon, the total content of other residual elements does not exceed 0.6%. According to the external dimensions and individual weight, scrap steel can be classified into ten types, including heavy scrap steel, medium scrap steel, and thin sheet scrap steel, as specified in Table 2.

In addition to the general classification, the national standard also specifies other technical requirements for scrap steel, including but not limited to rust conditions, alloy element content, composition of scrap steel, control of hazardous substances, etc. Therefore, the inspection items for scrap steel quality include individual piece’s external dimensions, weight, thickness; inclusions and cleanliness; harmful substances and radioactive materials; chemical element sampling; calculation of the bulk density of crushed materials, etc.

As a supplement and improvement to “Ferrous Scrap,” the Chinese government issued “Recycled Steel Raw Materials GB/T 39733-2020” in 2020. It provides a detailed classification of 18 different grades of recycled steel raw materials under seven major categories, with clear specifications for the processing methods for each grade. Unlike scrap steel, which requires secondary processing to meet the furnace requirements, according to the national regulations, recycled steel raw materials must be furnace-ready products that can be directly used in the furnace. Currently, domestic scrap steel recycling in China still follows the implementation of “Ferrous Scrap,” but the import standards for scrap steel have fully transitioned to “Recycled Steel Raw Materials.”

Availability and cost of steel scrap

During the initial stage of scrap steel recycling, due to various types, mixed weights, and irregular sizes, most of the scrap steel cannot be directly used by steel mills. Therefore, the scrap steel supply sector needs to go through processes such as dismantling, classification, purification, and product processing to transform different types and specifications of scrap steel into furnace-ready materials according to the requirements of steel production (with GB/T 4223-2017 being the recommended standard, which is widely adopted by steel enterprises in China). Steel mills and scrap steel dealers are the main players in scrap steel processing, employing methods such as manual sorting, oxygen cutting, shearing, crushing, and baling.

In the upstream of the scrap steel recycling industry chain, based on the sequence of processes, it can be divided into solid waste generators, recycling companies, and processing bases. Solid waste generators are the main suppliers of scrap steel raw materials and mainly involve demolition companies, automobile recycling companies, ship dismantling companies, etc. Due to the diverse sources of scrap steel, the upstream entities exhibit a relatively decentralized characteristic. Solid waste generators generally do not engage in scrap steel processing. Recycling companies are primarily responsible for collecting and categorizing scrap steel raw materials and selling them to processing bases. The scrap steel raw materials will first be transported to transshipment sites (as the main transportation method for scrap steel is by road, the transportation range is generally within 500 kilometers). After simple sorting and stacking, the materials will be weighed using a weighbridge. After radiation detection, the raw materials enter the processing stage and become qualified scrap steel. The processing bases are responsible for processing the scrap steel raw materials. The processing methods mainly include crushing (including cutting, crushing, and drop-hammering) and baling (compacting into briquettes or blocks).

The distribution of scrap steel resources in China is not evenly balanced. Over 80% of the scrap steel resources are concentrated in 12 provinces and cities, including Beijing, Tianjin, Hebei, Liaoning, Heilongjiang, Shanxi, Jiangsu, Shandong, Shanghai, Hubei, Sichuan, and Guangdong, where industrial or mining development is more concentrated. In other regions, the generation of scrap steel resources is relatively low due to factors such as limited transportation convenience and sparse population distribution.

Imports are one of the sources of scrap steel in China. Prior to 2019, China had been a net importer of scrap steel, with an average annual import volume of around 2 million tons from 2013 to 2018. However, starting from July 1, 2019, scrap steel was moved from the “Catalog of Solid Wastes that Can Be Used as Raw Materials for Non-Restricted Imports” to the “Catalog of Solid Wastes that Can Be Used as Raw Materials for Restricted Imports,” resulting in a sharp decline in scrap steel imports. From January 1, 2021, according to the “Announcement on Matters Related to the Comprehensive Ban on the Import of Solid Waste,” the import of solid waste, including scrap steel, was completely prohibited. On the same day, the national standard for “Recycled Steel Raw Materials” was officially implemented, allowing processed recycled steel raw materials to be imported into the country. From January to June 2022, China imported approximately 120,000 tons of recycled steel raw materials, which is a significant decrease compared to the period before 2019. However, in terms of the overall consumption of scrap steel in the country, the impact on China’s total supply of scrap steel is not significant.

In conclusion, from the generation to the furnace entry of scrap steel, the main costs involved include recycling, transportation, sorting, processing, and packaging costs.

Consumption and downstream

Scrap steel is a direct substitute for iron ore and is primarily used in the downstream sector of ferrous metal smelting and pressing. Approximately 85% to 90% of scrap steel is used for steelmaking, while the remaining 10% to 15% is utilized in casting, iron refining, and recycled steel production. Compared to iron ore-based steelmaking (a lengthy process), the input-output ratio of scrap steel is close to 1:1. It can be directly fed into steel furnaces, eliminating the need for mining, beneficiation, coking, and iron refining processes. This significantly reduces harmful emissions and energy requirements.

The consumption end-users for smelting scrap steel are primarily in the ferrous metal smelting and pressing industry, with the actual distribution divided between converters and electric furnaces. Converters are the final step in the long-process ironmaking and converter steelmaking. Historically, the proportion of scrap steel added to crude steel production (crude steel production/iron production – 1) in China has generally been around 10% to 20%, with a historical peak reaching nearly 30%. Short-process electric furnaces mainly rely on scrap steel as their raw material, with an additive ratio close to 100%.

In 2021, China’s pig iron production was approximately 870 million tons, and crude steel production was around 1.03 billion tons. The difference of 160 million tons comes from scrap steel addition and electric furnace steelmaking. Translated into scrap steel addition ratio, it is approximately 18.4%. Overall, the ferrous metal smelting and pressing industry is the only consumption end-user for scrap steel.

According to data from the Institute of Metallurgical Industry Planning in 2021, there are a total of 257 electric arc furnaces in the country, with a total production capacity of about 180 million tons. The production capacity is relatively concentrated in the eastern, southern, central, and southwestern regions, accounting for a combined 86%, with shares of 37%, 20%, 16%, and 13% respectively. In terms of provinces, Jiangsu, Guangdong, Shandong, Sichuan, and Hubei have a relatively high capacity of electric arc furnaces. Jiangsu has a capacity of 24.05 million tons, Guangdong has 20.885 million tons, and Hubei has 14.62 million tons. In general, electric arc furnaces are mainly located in regions with abundant scrap steel and electricity resources, providing a comparative cost advantage over other provinces and cities.


Scrap steel is an important component of China’s iron element circulation. It is projected that by 2025, China’s steel stockpile will reach nearly 14 billion tons. Taking into account the proportion of steel stockpile (accumulated steel before it is scrapped) and the generation of scrap steel (steel recycled and reused after reaching its lifespan), based on the international ratio of 2% to 3%, it is estimated that China will generate 280 million to 420 million tons of scrap steel annually. This will greatly alleviate the current situation of heavy reliance on imported raw materials for ferrous metal smelting in China. Additionally, electric furnaces have significant advantages over blast furnaces in terms of emissions and environmental protection. Therefore, the recycling of scrap steel and electric furnace metallurgy will be a direction that supports China’s green development strategy in the ferrous metal industry.

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