China's scrap mounds threaten global iron-ore industry

Melbourne

AS China's booming middle class junks ageing cars and home appliances, the next threat to the world's ailing iron-ore producers is materialising. In a country that uses more steel than any other, it's now become about as profitable to make the alloy by melting down scrap metal as it is from iron-ore and coal in a traditional furnace, Bloomberg Intelligence calculates.

China's scrap supply will double in the next decade and then accelerate at an even faster rate, according to Morningstar Inc. Expanded use of recycled metal in China at a time of a global steel surplus means even less demand for the ore that's the top earner for BHP Billiton and Rio Tinto Group, who've already seen profits plunge with prices.