BEIJING, Feb 6 (Reuters) - China's effort to raise the amount of steel it recycles is expected to have a growing impact on demand for the raw material iron ore, threatening to worsen a worldwide supply glut and putting further pressure on global suppliers.
China sourced 78.5 percent of its total iron ore needs from overseas last year, importing a record 933 million tonnes, but is now trying to make more use of vast amounts of steel buried in landfills or encased in concrete.
Analysts said it could start making an impact on the market as early as this year, as moves to improve collection rates start to kick in, and as much as 200 million tonnes of scrap could be generated per annum by 2020.
"Iron ore demand is going to be in decline from 2017 because scrap generation will be growing faster than demand," said Ian Roper, an analyst at CLSA, said at a conference in Beijing.
"Chinese blast furnaces only use 8 percent scrap and you can run that up to 20 percent, so there are no barriers, and it isn't going to be left on the ground," said Roper.
Mega miners like Vale, Rio Tinto and BHP Billiton have raised supplies by 234 million tonnes in the last two years, driving down prices and boosting their market share in China, which buys around two thirds of global seaborne iron ore.
An economic slowdown cut China's apparent steel consumption last year for the first time since 1981, and some forecast output to peak very soon, but ore demand could also be hit by even marginal improvements in recycling.
Huang Dao, an official with the China Iron and Steel Association, said at the end of last year that 91 percent of China's steel production comes from pig iron rather than scrap, compared to around 35 percent in the United States.
"China's scrap steel collection is pretty low because looking at the life of construction materials, which last 70 years or even longer, rebar buried in cement cannot immediately return to the smelter," he said.
Oliver Ramsbottom, a partner at McKinsey who follows China's steel market, said he expected a larger reservoir of scrap to emerge this year after strenuous efforts by the government to "create a structure" for the market by setting up scrap collection and sorting facilities.
In previous forecasts, BHP Billiton has estimated that China's scrap ratio will rise to around 20 percent by 2020 and to around 30-39 percent by 2030. (Reporting by David Stanway; Editing by Ed Davies)