Metallics Markets in Transition: Embracing Low-Emissions Steel Production

As efforts to increase the use of electric arc furnace (EAF) steelmaking gain momentum in Europe, North America, and Asia, together with a rising demand for high purity scrap and direct-reduced iron, ferrous scrap markets are anticipating an ever-wider role in the decarbonization of the steel industry.

While competing for scrap grades, mills depending on both new EAFs and conventional pig iron-based steelmaking will rely on metallics to bridge their overall feedstock requirements and costs. Purer ferrous scrap grades are needed to make higher-quality steel with an EAF, but these grades are harder to come by. As a result, new EAFs are forced to hunt for merchant pig iron with low residuals and DRI (direct reduced iron) products as feedstocks.

Before 2030, it has been announced that there would be more than 10 million mt/year of DRI and EAF steel capacity under development based on the initial phase of low-emissions steel investments in Europe. Instead of relying solely on their scrap collection networks and the local scrap market, where prices for higher quality grades would probably increase with increased demand and shortages, various steel groups that are replacing some blast furnace production are pursuing natural gas and hydrogen-based DRI.

Currently, European scrap yards and processors collaborate with traders to export scrap, including premium grades, under long-term contracts and one-off sales to Turkey, the United States, and various Asian markets. Future scrap export limits may force suppliers to concentrate on supplying local EAF and steel mills as well as countries that are members of the OECD (The Organization for Economic Cooperation and Development).

The level of underlying steel production determines how readily available the best quality ferrous scrap is, such as fresh arisings gathered from processing steel products. Recycled scrap grades are more reliant on large-scale variables, which include new infrastructure and fixed investments, demolition, grants and subsidies, consumer policies, and recycling. Demand on the scrap market, the expense of collecting and processing, and scrap pricing all have an impact on supply.

While yields, crude steel costs, collection, and further processing are all factors that affect arisings costs, DRI costs and pig iron market prices may also be taking a bigger role in determining how much an arising is worth. High-quality, metallic iron products with few impurities are essential for EAFs to produce particular steel grades, such as high-quality long and flat steels.

According to market sources, new supplies of DRI products with lower emissions and trade limits on scrap supply will create new difficulties and opportunities. Long-term flexibility will be possible if the steel sector makes investments to gradually reduce steel emissions thanks to changes in trash and feedstocks as new DRI facilities begin operating from 2025.