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POSCO increases scrap purchases by 30% in transition to environmentally friendly production

POSCO Group is accelerating its transition to an environmentally friendly production system by increasing its annual scrap use by 33% by 2030. This move will create a significant change in the scrap market and may lead to an increase in prices.

POSCO increases scrap purchases by 30% in transition to environmentally friendly production

POSCO Group is pursuing a strategy to secure scrap within the scope of the transition to the "2050 Carbon Neutral Production System". The company increased its annual scrap usage target from 8.59 million tons to 9.2 million tons by 2030. This increase will create a significant increase in demand in the scrap market.

POSCO is taking various steps to ensure a stable supply of scrap. The company leases processing facilities such as compressors and excavators from major scrap suppliers, and makes long-term contracts and shipyard investments to secure scrap abroad. It also plans to establish an integrated internal and external scrap center for selecting, storing and processing scrap.

POSCO's electric furnace investments will also increase the demand for scrap. The company plans to commission a total of two large electric furnaces, at Gwangyang Steel Works in Jeollanam-do by 2025 and at Pohang Steel Works by 2027. Electric furnaces produce less carbon emissions than coal-fired blast furnaces and also increase the use of scrap.

Recently, the price of scrap was around 390,000 won (USD 281) per ton, down nearly 18% from a year ago. This is due to the decrease in demand for scrap as electric arc furnace companies, which mainly produce construction materials such as long products, cut production due to the recession in construction.

However, construction material prices have recently recovered and the demand for scrap is expected to increase due to expectations that crude steel production will increase in the second half of this year.

These moves by POSCO will create a significant change in the scrap market. Scrap prices are expected to increase, which worries medium and small-sized steel companies. Additionally, countries such as China and Russia have banned scrap exports, which could increase import costs and push scrap prices even higher.

According to the Korean Steel Association, domestic scrap demand in 2030 is expected to be 32.75 million tons, while domestic supply is expected to be only 29.08 million tons.

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SteelRadar Insight - Sayı 1 (Haziran 2024)

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