In the realm of steel production, scrap steel stands as a vital resource, offering both economic and environmental benefits.
However, the United Kingdom’s approach to its scrap market presents a unique challenge. Despite producing approximately 10-11 million tons of scrap steel annually, a staggering 80% of this material is exported, predominantly to developing countries. This practice not only imposes additional carbon footprint through shipping but also risks depleting a crucial resource at a time when domestic demand is on the rise, especially with planned investments in new Electric Arc Furnace (EAF) production.
The UK’s status as the world’s second-largest exporter of scrap on an absolute scale and the largest exporter per capita underscores the urgency for policy intervention. As the steel sector undergoes a profound transformation towards Net Zero emissions, scrap steel will undoubtedly play a central role. Thus, there’s a pressing need for the government to ensure the future accessibility of scrap steel for industry, enhancing its quality and availability while fulfilling environmental obligations.
Looking ahead, the demand for scrap steel in the UK is poised to escalate significantly. With a potential tripling of scrap consumption by 2050, driven primarily by the expansion of EAF production, the necessity for a sustained supply becomes increasingly evident. The introduction of new EAF capacity, such as the planned facility in Port Talbot, signifies a substantial uptick in domestic scrap consumption, anticipated to commence around 2027.
Moreover, on a global scale, the demand for scrap steel is also expected to surge. As steelmakers worldwide transition towards lower-carbon production methods, the reliance on scrap as a primary raw material will intensify. However, this surge in demand coincides with potential restrictions on global scrap supply, particularly with impending changes to the EU’s Waste Shipment Regulation, which could disrupt traditional export channels.
Environmental considerations further compound the urgency for strategic intervention. The current practice of exporting a significant portion of UK scrap steel results in a higher carbon footprint, especially when considering the transport-related emissions associated with re-importing recycled steel. Additionally, the export of scrap to countries with lower environmental standards poses further environmental and health risks.
To maximize the value derived from the UK’s scrap supply, a shift towards advanced sorting and processing is imperative. Ferrous scrap contains valuable non-ferrous materials like copper, nickel, and aluminum, which remain untapped due to the prevailing export-oriented approach.
In conclusion, the UK scrap market stands at a critical juncture, requiring proactive policy measures to secure its sustainability and capitalize on its potential. By fostering a conducive policy environment aligned with decarbonisation goals and global trends, the UK can not only safeguard its access to scrap steel but also pave the way for a resilient and environmentally responsible steel sector in the journey towards Net Zero emissions.
UK Steel Director General, Gareth Stace, said:
Tata Steel’s announcement demonstrates the difficulty of operating in such a challenging steel market, with low steel demand, softening prices, and increasing costs. Decades of an uncompetitive business landscape have led to a lack of historical capital investment. Ageing assets at the end of their life means some companies must make impossible choices ahead of significant investment in green steelmaking.
Electric Arc Furnaces can produce a vast range of steel products, and existing EAF steelmakers in the UK are already producing highly specialised steel for aerospace and defence applications. The UK needs a modern and robust domestic steel sector to build a strong, resilient, low-carbon economy, but the industry faces steep challenges on the path to complete decarbonisation in little more than a decade.
Over the next few years, the sector will accelerate innovation and collaborate with our varied customer base to supply green steel via Electric Arc Furnace steelmaking, using the abundance of scrap steel that the UK generates each year. Government must continue its pledge to significantly support the UK steel sector. It is time to accelerate commitments to deliver competitive electricity prices, grow green public procurement of steel, and ensure a trade remedies regime that backs British business.”
