Introduction: What are the advantages and disadvantages of electric furnace steel?
Whether a new technology or a new device can be widely accepted by the market fundamentally depends on its economic feasibility. In layman’s terms, it means “appropriate”. Under the premise of the same quality and similar selling prices, the cost of electric furnace steelmaking is cheaper than that of blast furnace – converter steelmaking. Then, whether electric furnace steelmaking is feasible mainly depends on the availability of sufficient scrap steel, adequate electricity and relatively low electricity charges. On the other hand, from the demand side, the main steel products produced by electric furnace steelmaking should have sufficient market demand and appropriate prices.
China’s steel industry has experienced decades of rapid development, with the accumulation of steel constantly increasing. In the future, a large amount of scrap steel resources are bound to be generated. Just as in the 1990s when open-hearth furnaces were converted to converters, the urgent need to increase crude steel production capacity and the abundance of scrap steel resources led to the commissioning of a large number of electric furnace steelmaking equipment, by the end of June, with the removal of substandard steel in medium-frequency furnaces, the short process of electric furnaces using scrap steel as raw materials will usher in a new period of development opportunities. The current proportion of electric furnace steel in our country is only 6.1%. In the United States, Europe, and even some countries in the Middle East, the proportion of electric furnace steelmaking far exceeds ours. All the conditions such as resource recycling, energy conservation and environmental protection tell us that we should seize the opportunity to develop electric furnace steelmaking.
However, the more bustling the situation, the more we need to remain calm. Why is it that among developed countries, Japan, which has abundant steel reserves and advanced steelmaking technology, and whose steel industry was once our “master”, the proportion of electric furnace steel in Japan has remained at 24% in recent years, still having a considerable gap compared to the levels of Europe and America? At the same time, Japan is also a net exporter of scrap steel. Why do they use scrap steel resources for export instead of developing their own electric furnace steel? A stone from another mountain can be used to polish jade. With these questions in mind, let’s go to our close neighbor Japan to find out:
I. The Generation of Scrap Steel in Japan
The generation of scrap steel is on the rise
Scrap steel generation in Japan includes self-produced scrap steel from steel mills and social scrap steel. Social scrap steel is further classified into discarded scrap steel and processed scrap steel. Scrap steel includes recycled products from automobiles, steel materials, machinery, railway tracks and ships. Processed scrap steel, on the other hand, is the scrap steel produced by various industrial sectors that use steel during the processing of steel.
Generally speaking, the generation of scrap steel is directly proportional to the amount of steel accumulated. In European and American countries with a long history of steel consumption, due to the large amount of steel accumulated, the generation of scrap steel is also large. Japan’s extensive use of steel started more than 50 years later than that of European and American countries. From the late 1950s, the steel that was widely used in Japan became scrap steel after entering the formation cycle of old scrap steel. Before the 1990s, the amount of scrap steel generated in Japan increased rapidly, with an average recycling rate of about 2.5% to 3%, indicating that the steel that was widely used during Japan’s period of rapid economic growth was recycled when it reached the age for forming scrap steel. Over the past 20 years, the growth rate of scrap steel generated in Japan has slowed down, and the recovery rate has decreased to between 2% and 2.3%. However, with the increase in steel reserves, the overall amount of scrap steel generated in Japan is still on the rise.
- The generation of processed scrap steel is related to steel consumption
Processing scrap steel refers to the scrap steel produced by various industrial sectors that use steel during the processing of steel. The amount generated is directly related to the consumption of steel. However, the production of scrap steel varies greatly among different departments, which is influenced by the nature of the industrial sector and the consumption of steel for different uses. Generally speaking, the generation rate of processing scrap steel in sectors such as automobiles, industrial machinery, and shipbuilding is higher than that in the construction industry. Therefore, although Japan’s construction industry consumes a large amount of steel, the average generation rate of processed scrap steel is lower than that of European and American countries.
In addition, the amount of processed scrap steel produced also depends on how well the steel mill standardizes the dimensions to meet the requirements of users during the production of steel, as well as the extent to which users make reasonable use of processing technology. An increase in steel consumption will also lead to a rise in the amount of processed scrap steel generated.
The main sources of scrap steel processing in Japan include the automotive industry, mechanical manufacturing industry, civil engineering, construction industry, etc. In 2011, 68% of Japan’s processed scrap steel came from the automotive industry, followed by industrial machinery, accounting for 10%. Scrap steel from the electrical machinery and shipbuilding industries accounted for 7% and 6% respectively.
Ii. Changes in Scrap Steel Demand in Japan
From the perspective of the development history of steelmaking in Japan, Japan was in the first half of a period of rapid economic growth after World War II, and the demand for steel increased rapidly. Therefore, it was necessary to vigorously develop the steel industry. During this period, the consumption of scrap steel in Japan was roughly determined by the output of crude steel and was affected by the production ratios of electric furnaces, open hearth furnaces that mainly used scrap steel as raw material and converters that mainly used molten iron as raw material.
From 1950 to 1965, the growth of Japan’s crude steel output was mainly achieved through the open-hearth steelmaking method that extensively utilized scrap steel. However, due to the insufficient domestic scrap steel production to meet the demand, a large amount of scrap steel had to be imported and the supply was unstable. As a result, Japan determined to shift its steel industry development towards a production structure that focused on the converter production method for increasing pig iron production. And in 1977, the open-hearth steelmaking method was abolished. During the period of developing converters to reduce the proportion of open hearth furnaces, Japan controlled the proportion of electric furnace steel. As a result, the proportion of electric furnace steel in Japan was within 20% in the 1960s and 1970s.
After 1975, the domestic supply of scrap steel in Japan eased somewhat, and the reliance on imported scrap steel decreased. At the same time, during the 1973 oil crisis, Japanese electric furnace plants carried out rationalization renovations on their product structures and equipment. Since then, electric furnace steelmaking has entered a stage of rapid development, with the output ratio increasing year by year, from 17% in 1975 to a peak level of 33% in 1996. The increase in scrap steel demand caused by the growth in electric furnace steel output is offset by the decline in the proportion of scrap steel from converters.
After 1996, the proportion of electric furnace steel production in Japan began to decline continuously, mainly due to the decrease in demand for electric furnace steel products. After the 1990s, Japan’s economy stagnated and the real estate bubble burst. The common carbon steel produced by electric furnace steel mills was mostly for construction. The sluggishness of the construction industry led to a decline in the demand for electric furnace steel products. The output of trucks, which symbolized the activity level of the construction industry, showed a continuous downward trend.
Unlike the trend of truck production, the output of transportation vehicles in Japan has maintained a steady upward trend after a period of decline in the early 1990s, indicating that the overall demand for steel in Japan remains stable. Therefore, while the output of crude steel has been steadily increasing, the decline in the output of electric furnace steel has led to a continuous decrease in the proportion of electric furnace steel, dropping to 21% by 2009.
Due to the sluggish demand for electric furnace steel products, the peak proportion of electric furnace steel in Japan was only around 33%, while in the United States, another developed region, the proportion of electric furnace steel was as high as 50% to 60%, and in the European Union, it was around 40%. At present, there are approximately 40 electric furnace enterprises in Japan, with an annual production capacity of 40 million tons. However, the actual output is only over 20 million tons, indicating a serious situation of overcapacity.
The main reasons why the proportion of electric furnace steel production in Japan has not reached as high as that in the United States or Europe are as follows:
The decline in demand for electric furnace steel has affected the growth of electric furnace production. The main product of electric furnace steel in Japan is construction steel. After the bubble burst in the 1990s, the Japanese economy entered a long-term downturn. The real estate and infrastructure industries in Japan were in a long-term downward trend, and the demand for electric furnace steelmaking began to decline. This directly leads to a reduction in the output of electric furnace steel and a decline in its proportion in the total crude steel output.
- The reduction in Japan’s electric furnace steel output has led to a decrease in domestic scrap steel consumption, resulting in an increase in surplus resources. As the price of scrap steel rises later, Japan has shifted from a net importer to a net exporter of scrap steel. The outflow of scrap steel resources has led to a reduction in domestic resources, which in turn has increased the cost of electric furnace steelmaking in Japan, preventing the output of electric furnace steelmaking from growing at a faster pace.
- Power shortage and high electricity prices: Japan is a country lacking in energy, and the energy it uses mainly relies on imports. Therefore, Japan particularly pursues high efficiency and economy in energy utilization. The main energy source for power generation in Japan is atomic energy, followed by oil. Natural gas, coal and hydropower rank third, fourth and fifth respectively. In Japan, the proportion of oil consumption in total energy consumption is large, but the proportion of oil used for power generation is not large and is decreasing year by year, while the proportion of natural gas used for power generation is large and is constantly increasing. In the past, heavy oil was widely used for power generation. However, as the pollution problem caused by coal power generation has been solved, the use of coal has increased now. Oil, natural gas and coal are almost all dependent on imports. Affected by the fluctuations in the prices of bulk commodities in the international market.
- Slow technological development speed and small market share: Converter technology has developed faster, while electric furnace technology has developed relatively slower. Due to the rapid development of converter technology and the improvement of labor productivity, the major share of the domestic steel market in Japan was eventually occupied by long-process steel mills with blast furnaces and converters, and converter steel mills became the dominant force in the market. Therefore, the long process of using imported ore – sintered ore – blast furnace – converter, with the advancement of technology, the improvement of environmentally friendly equipment and emissions, has made the superiority of electric furnace steelmaking in reducing pollution not obvious, and to a certain extent, it has also restricted the development of relatively low-end electric furnace steel.