By Pol Busquets, Juan Luis Vilchez and Giacomo Sandicchi

The global steel industry is on the brink of a major challenge: steel scrap scarcity. Driven by the growing demand for sustainable and low-emission steel, this shortage is expected to severely impact the industry's supply chain by 2030. How can industry stakeholders prepare for this looming scarcity while continuing their decarbonization journey?

Why this topic matters

The steel industry is at a critical crossroads due to increasing global efforts to combat climate change. With steel production responsible for approximately 7-9% of global CO₂ emissions, achieving net-zero carbon targets depends heavily on the sector’s ability to decarbonize. This urgency is underscored by global commitments like the Paris Agreement and regional regulations such as the European Union’s Fit for 55 framework and the Green Deal, which aim to accelerate emission reductions across industries. As a result, the transition to less carbon-intensive production methods has become an industry-wide imperative.

Electric Arc Furnace (EAF) technology has emerged as a cornerstone of this transformation. Unlike traditional blast furnaces, which rely on iron ore and coking coal, EAFs predominantly use recycled steel scrap as their primary input. This switch dramatically reduces CO₂ emissions, offering up to threefold reductions compared to conventional methods. Consequently, many steelmakers are now prioritizing the adoption of EAFs to align with sustainability goals and meet growing stakeholder expectations.

However, this shift has created new challenges. The increasing reliance on scrap as a raw material has led to rising demand for high-quality scrap, far exceeding current supply capabilities. The availability of scrap is constrained by several factors, including the long lifecycle of steel products, economic fluctuations, and reduced output from key sectors like automotive and manufacturing. Without addressing this supply-demand gap, the progress toward decarbonization could stall, creating risks for the global steel supply chain and broader industrial development.

Our perspective on the topic

To address the issue of steel scrap scarcity, the industry must adopt a comprehensive and collaborative approach. Steelmakers, scrap processors, and policymakers each have critical roles to play in mitigating risks and ensuring long-term sustainability.

From the steelmakers’ perspective, building stronger partnerships with scrap suppliers and pursuing upstream integration are essential. For instance, acquiring or partnering with scrap processors can secure a more reliable and consistent supply of high-quality scrap. Additionally, adopting digital tools and advanced analytics can help optimize scrap usage during the steelmaking process, minimizing waste and reducing costs. Closed-loop systems, where scrap generated during customer use is reintroduced into production, represent another viable solution to maximize material efficiency.

Scrap processors, on the other hand, must diversify their input sources and invest in advanced recycling technologies to increase capacity and efficiency. Innovations such as AI-enabled scrap classification and advanced sensing technologies (e.g., X-ray fluorescence) can significantly enhance recycling accuracy and recovery rates, ensuring a steady supply of quality material. By prioritizing these technological advancements, processors can position themselves as critical enablers of the steel industry’s decarbonization efforts .

Policymakers also have a crucial role to play in addressing steel scrap scarcity. Regulatory frameworks that incentivize innovation, promote recycling systems, and encourage cross-industry collaboration can catalyze meaningful progress. For example, the EU’s End-of-Life Vehicle Regulations push industries toward greater circularity by mandating the use of recycled materials in automotive production . Expanding such initiatives to other sectors could further boost scrap availability and reduce reliance on virgin materials.

Important trends and developments

Several important trends and developments underscore the urgency of addressing steel scrap scarcity while highlighting potential solutions:

• EAF Growth: The adoption of EAF technology is accelerating, with projections indicating that it will account for 60% of Europe’s crude steel production by 2030, up from 50% in 2022. This growth will place even greater demand on the already constrained scrap supply chain.
• Supply-Demand Imbalance: The annual demand for high-quality scrap is growing at a rate of 3%, while supply is increasing by less than 1% annually. This imbalance is expected to peak after 2030, creating a critical supply deficit unless immediate action is taken.
• Technological Innovations: Advances in sensing and sorting technologies, such as X-ray fluorescence and AI-driven solutions, are improving the efficiency of scrap recycling. These tools enable better classification and recovery, helping the industry meet growing demand while lowering costs.
• Regulatory Push for Circularity: Policy measures like the EU’s End-of-Life Vehicle Regulations are fostering greater circularity by requiring higher recycling rates and encouraging the reuse of materials across industries. These policies not only support decarbonization but also promote resilience within the scrap supply chain.
• To address these trends effectively, stakeholders must recognize the interconnected nature of the challenges. Investments in technology and infrastructure must be complemented by policy support and industry collaboration to create a balanced and resilient ecosystem.

Summary

The growing scarcity of steel scrap represents a significant challenge for an industry already under pressure to decarbonize. However, this challenge also presents an opportunity for innovation, collaboration, and long-term competitiveness. To mitigate the risks associated with scrap shortages, stakeholders across the steel value chain must take proactive steps.

Steelmakers can adopt strategies such as forming partnerships with scrap suppliers, investing in closed-loop systems, and leveraging AI to optimize scrap usage. Scrap processors must focus on diversifying input sources, scaling up capacity, and implementing advanced recycling technologies to enhance efficiency. Meanwhile, policymakers have a vital role in creating regulatory frameworks that incentivize innovation, promote circularity, and facilitate collaboration among industry players.

The future of sustainable steel production hinges on the ability to address scrap scarcity effectively. By taking coordinated action now, the industry can secure a reliable supply of high-quality scrap, reduce carbon emissions, and meet the growing demand for green steel. Through technological innovation, policy alignment, and strategic collaboration, stakeholders can turn the challenge of scrap scarcity into an opportunity to lead the global transition toward a more sustainable industrial future.