The use of scrap in steel production is a necessary action for the decarbonization of the country.
Steel industry representatives, scrap metal disposal associations and officials noted that in addition to quarantine measures and the economic downturn, there are several other factors affecting the use of scrap metal. They underlined that these are problems, especially related to taxation. There are many small businesses operating in the scrap metal processing sector, which operate mostly in cash, so the government loses VAT collection. However, this problem is being corrected by the government's decision. With this decision, the government's activities increase the tax burden on processors and they still escape billing.
China has also set high standards for imported scrap in relation to the included content. The varieties that meet these have been limited, so the exporters' willingness to comply with the standards has also decreased. Steel enterprises are cautious about importing raw materials due to the possibility of prosecution. In addition, the amount of scrap used by steel mills largely depended on the price.
These problems can be solved by a number of steps, especially lowering the income tax rate to encourage processing enterprises to pay taxes. At the same time, the relaxation and revision of imported scrap standards in line with the country's environmental goals will help increase supply. In addition, the state should promote connections between steel producers and processors. This will make it possible to create an integrated platform for waste processing.
Increasing the import and domestic processing of scrap and using it in the steel industry is one of the elements of China's strategy. The country also plans to increase domestic iron ore production and expand mining rights in foreign markets.
World scrap metal consumption in steel production in 2022 decreased by 7% compared to 2021 and decreased to 610 million tons. China (225 million tons), the EU (78 million tons) and the United States (55 million tons) are among the top three scrap consumers.
It is also believed that there is currently no risk in Europe in the supply of scrap for the needs of European steelmakers.
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