Alexandra Dock in Liverpool is one of the UK’s busiest scrap metal yards. The sprawling site on the River Mersey can process up to 500,000 cars a year and sends about 1mn tonnes of recycled steel annually to customers around the world.
With a giant shredder that can chew through 400 tonnes of material an hour, the facility — owned by Britain’s largest private metals recycler and one of the biggest in the world European Metal Recycling — is poised for more business in the green steel transition.
Investors needed to “ready themselves for the scrap revolution”, said Nick Pickens, research director for global mining at consultancy Wood Mackenzie, last year.
“A combination of extraordinary growth in demand for metals, the need to reduce industrial emissions and elevated energy security concerns will all underpin a prolonged surge in investment in recycled metal.”
The global demand for steel scrap was estimated at between 620mn and 630mn tonnes in 2022 and is projected to surge nearly 1.6 times to 1,000-1,020mn tonnes by 2050 as steel decarbonisation picks up pace, according to Wood Mackenzie.
This is because green steel production involves switching to cleaner electric arc furnaces that melt down 100 per cent of scrap. This compares with a traditional blast furnace that can only use up to a maximum of 30 per cent of scrap.
Britain’s two largest steelmakers, British Steel and Tata Steel UK, have both announced plans to use much more scrap steel as they close their blast furnaces and replace them with electric arcs.
“The single biggest opportunity that exists for the metal recycling industry is green steel,” said Chris Sheppard, EMR chief executive and son of the group’s founder, adding that he preferred the term “recycled steel” rather than scrap.
In a recent report, Gareth Stace, head of industry trade body UK Steel, said: “Steel scrap is core to our rapid transition to net zero.”
The challenge for the steel industry will be to ensure enough scrap steel is available as input material for more electric arc furnaces.
The UK produces 10mn-11mn tonnes of scrap steel each year of which less than 3mn is recycled. The rest is exported as there is not enough demand from domestic steelmakers.
UK Steel forecasts scrap consumption from the steel sector could nearly treble by 2050, increasing up to 7mn tonnes a year as a result of the moves to electric arc furnaces by the two largest steelmakers.
The UK’s other two main steelmakers — Celsa UK and Liberty Steel — already operate electric arc furnaces. Celsa also has its own recycling business that provides material to its steelmaking activities although the company purchases additional scrap from external suppliers.
UK Steel wants the government to ensure the industry has enough scrap steel supplies in preparation for what it predicts will be a “surge in demand” in Britain and worldwide. It also fears that exporting scrap to countries with lower environmental standards could fuel carbon emissions.
“What is shocking is that the UK produces more than 10mn tonnes of scrap a year, but exports 80 per cent of it,” said Stace. “With so many countries around the world acting swiftly to secure their own supply and restricting their exports, we cannot just sit on our hands.”
The trade body concedes that Britain’s steel industry will not use all the domestically generated scrap even once the electric arc furnaces are up and running, but says it wants to “get the balance right”.
It is calling for policy action on three fronts: scrap exports should only be allowed to countries that can demonstrate their ability to treat waste sustainably, the retention of scrap in the UK should be incentivised and the quality of scrap should be improved through greater support for better processing.
The association points out that the EU will introduce restrictions of scrap exports to non-OECD countries from 2027 unless they can demonstrate sustainable practices, noting that “[this] alone will cause an additional draw on UK supplies from countries that can no longer source from the EU”.
Scrap industry executives, however, are wary about potential restrictions, warning that these could undermine the price of the recycled material.
The “inevitable result of constraining all the scrap in the UK” could lead to dramatic oversupply, warned James Kelly, chief executive of the British Metals Recycling Association.
“Massive oversupply would crash the price of scrap steel . . . [and] would have a potentially devastating impact on the scrap industry,” he said.
EMR’s Sheppard said there were broader issues that policymakers should address, including putting in place incentives that drive demand for low-carbon steel.
These would help penalise steel produced through carbon intensive methods, which would increase demand for local recycled raw materials. It is also important to have a renewable energy infrastructure that “enables a globally cost competitive steel (and recycling) industry”.
“One of the biggest obstacles to making steel in the UK is the cost of electricity compared with the rest of the world,” Sheppard added.
Industry experts believe the increasing demand for scrap represents an opportunity for the industry to improve its quality, notably through better processing and recycling methods.
“The UK should try and prioritise all the innovation space that is created by this electrification,” said Julian Allwood of the University of Cambridge and co-author of a report on the industry.
“If we get to 4.5-5 tonnes of electric arc capacity in the UK, that is about half of the amount of scrap that we create each year. That motivates a lot of opportunities for the existing and perhaps new entrant players in the scrap chain to raise the quality of what they are doing.”
Allwood pointed out that scrap is often contaminated by elements such as copper that make recycling more difficult, especially into higher-end steel products. When old cars are recycled at the end of their life, for example, they are shredded, leading to an input material containing all the copper in their motors.
There will also have to be closer co-operation between steelmakers and recyclers. EMR is already working on a research and development project with Tata Steel looking at how to put new grades of high-quality recycled materials directly into the blast furnace as a way of reducing emissions.
Decarbonisation “creates an opportunity for us to work with our steel mill customers to tailor our products . . . including providing different and higher quality grades depending on the types of products they will be manufacturing”, said Paul Wright, managing director of Sims Metal UK.
EMR’s Sheppard added: “I would love to be able to supply the highest quality recycled raw materials because that means I am providing more value as a business . . . What we need as a country is a vibrant recycling industry and a vibrant steel industry that can compete on a global level based on efficiency.”
