Circular transformation of the European steel industry renders scrap metal a strategic resource

TL;DR

The paper analyzes how the shift to electric arc furnaces in Europe's steel industry transforms scrap metal into a strategic resource, requiring major trade and ecosystem restructuring with significant economic implications.

Contribution

It provides a quantitative analysis of how increased EAF capacity impacts scrap trade flows and industry structure, highlighting the need for systemic restructuring.

Findings

European scrap imports decreased since 2007 while global trade increased

Each 1,000 tonnes of EAF capacity increases scrap imports by 550 tonnes

Additional EAF capacity could require 730 new companies and 35,000 jobs

Abstract

The steel industry is a major contributor to CO2 emissions, accounting for 7% of global emissions. The European steel industry is seeking to reduce its emissions by increasing the use of electric arc furnaces (EAFs), which can produce steel from scrap, marking a major shift towards a circular steel economy. Here, we show by combining trade with business intelligence data that this shift requires a deep restructuring of the global and European scrap trade, as well as a substantial scaling of the underlying business ecosystem. We find that the scrap imports of European countries with major EAF installations have steadily decreased since 2007 while globally scrap trade started to increase recently. Our statistical modelling shows that every 1,000 tonnes of EAF capacity installed is associated with an increase in annual imports of 550 tonnes and a decrease in annual exports of 1,000 tonnes of scrap, suggesting increased competition for scrap metal as countries ramp up their EAF capacity. Furthermore, each scrap company enables an increase of around 79,000 tonnes of EAF-based steel production per year in the EU. Taking these relations as causal and extrapolating to the currently planned EAF capacity, we find that an additional 730 (SD 140) companies might be required, employing about 35,000 people (IQR 29,000-50,000) and generating an additional estimated turnover of USD 35 billion (IQR 27-48). Our results thus suggest that scrap metal is likely to become a strategic resource. They highlight the need for a massive restructuring of the industry's supply networks and identify the resulting growth opportunities for companies.