Increasing scrap availability will change the competitiveness of companies

In connection with the growth of scrap supply in China, the peak in demand for iron ore in the world will be reached, according to one estimate, by 2050, and according to others, by the 2020s.

The world is expected to increase the volume of scrap available from 620 million tons in 2016 to 1.3 billion tons in 2050. China and other developing countries will account for the main growth. After 60 years, enough scrap metal will be collected around the world to meet 70% of steel demand. EBITDA of metallurgical companies is formed approximately 50/50 due to the commodity segment (iron ore, coal) and the steel segment.

According to McKinsey & Company, it is the access to raw materials that largely determines the cost of steel products (that is, the competitiveness of companies). Therefore, with a decrease in ore demand in the future, vertically integrated companies that have an advantage at the expense of raw materials will lose their competitiveness.

According to the materials GMK-Center