China's largest scrap dealer has indicated that the country will increase the use of scrap materials in steel production in the coming years.

Chun Chi Wai, chairman of China Metal Recycling Holdings said that the scrap material might account for about 20 per cent of the total steel production in the country as availability of scrap metal increases in the country. The move will have an impact on eh demand for iron ore in the global markets as China is a leading imported for iron ore.

The total steel production in China, which is the world's biggest steelmaker, fell to its lowest level in six months during the month of August. The steel prices have fallen to its lowest level since 2008, when the financial crisis hit the global economy.

Chun said that his company, which controls about 6 percent of China's fragmented scrap metals market, will look to increase operations in order to meet the growing demand for scrap metal in China. He pointed out that using scrap instead of iron ore is more energy and cost effective for the steelmakers.