China's junkyards a new threat for iron-ore
According to Goldman Sachs, China’s increasing use of recycled metal during a time of worldwide steel surplus could see the nation’s demand for iron ore halved by 2040 along with the profits of large producers such as BHP Billiton and Rio Tinto. Scrap supply is predicted to double in the next decade, as the electrical goods consumed by China's growing middle class are discarded; creating a new threat to the iron ore industry which is already suffering from a 50% plunge in steel prices from 2011 levels. By 2025, Morningstar estimates that iron ore prices will fall to $30 a metric ton, representing a new low compared to record lows of $38.50 reached in December 2015. Higher energy costs and the rise of electric mini-mills are also expected to challenge the iron ore industry. 

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. China's scrap supply will double in the next decade and then accelerate at an even faster rate, according to investment research firm Morningstar.

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, who've already seen profits plunge with prices. The nation's ore demand may halve by 2040 as steel use dwindles and more recycled metal is used, according to Goldman Sachs.

"The scrap wave is coming," said Oliver Ramsbottom, a Tokyo-based partner at consulting firm McKinsey, who sees a significant increase in China's scrap from mid next-decade. "There's no doubt that the iron-ore industry is going to be pretty challenged over the next decade - at least because you've obviously got a lot of supply out there."