Domestic scrap steel recycling – economic, environmental and socialopportunities (EV0490)

Steel plays a key role in UK manufacturing, and the modern world is based on and founded by the use of steel. Major industrial sectors such as power generation, infrastructure, automotive, engineering and construction all depend on steel, and these are all sectors which are forecast to grow and will require more steel as they expand. It is clear that the UK steel demand will grow, however production of steel using traditional blast furnace and basic oxygen furnace route is carbon intensive and alternative routes for steel production need to be investigated. If the UK were to recycle all of the scrap steel that it produced it would nearly be able to satisfy the country’s steel demand. The UK consumes approximately 11.9 Mt of semi-finished and finished steel products each year. Currently, the UK produces around 11.3 Mt of scrap steel each year, 2.6 Mt of that is used in domestic steel making which is a mixture of blast furnace – basic oxygen furnace and electric arc furnace production. The remainder of the scrap steel is exported for recycling in other countries with Turkey being the biggest consumer of scrap steel exported from the UK. There is a scope for greater recycling of scrap steel, up to 6.1 Mt, to be used domestically by the current steel production facilities if operating at maximum capacity, which would only be possible with significant investment in downstream processing (e.g. rolling) and greater demand for UK steel and or increasing the export of semi-finished steel products. Further use of domestically produced scrap steel would require greater UK based electric arc furnace steelmaking capacity. Electric arc furnaces melt scrap steel to produce crude steel that can then be further refined to make the steel grades that are required by consumers. Greenhouse gas emissions for electric arc furnaces are significantly lower than that of blast furnace – basic oxygen furnace steel production due to avoiding the pig iron production by using fossil fuel (coal) in the blast furnace ironmaking. To increase the electric arc furnace steel production capacity in the UK would require significant investment, estimated costs for an electric arc furnace steel manufacturing site could be over £1bn depending on the scale, location and complexity of any downstream steel production required. Electric arc furnace technology would need to be imported into the UK as there are no UK based manufacturers. There are a number of potential barriers to enabling increased recycling of scrap steel in the UK which need to be overcome. The business alignment between steel manufacturers and scrap suppliers (merchants) needs to be improved to enable a more efficient industry. The standards used to sort scrap steel in the UK are not sufficient to ensure that the scrap steel received by steel manufacturers is of the quality and consistency required to be easily recycled into high quality steel grades. The technology currently used to assess and sort the different grades and chemistries of scrap steel is not advanced enough, often scrap quality monitoring is completed by visual inspection, leading to poor quality scrap steel being used in the steelmaking process. The transition from the blast furnace ironmaking – basic oxygen steelmaking process to electric arc steelmaking is not straight forward, and there are a number of challenges in knowledge/expertise, energy supply and logistic that the steel manufacturers need to face in order to make the transition, in addition to meeting the customer requirements (e.g. steel grades, quality and price). If there is to be significant investment in the UK for electric arc steelmaking then any factors that impede investment will need to be overcome. Barriers to investment are mostly fiscal, with some affected by geography. UK steel producers have an operating cost disadvantage when compared with many other steel producing countries for electricity costs, and the cost of electricity becomes more important with the electric arc steel manufacturing process as electricity provides the bulk of the process energy. A similar overhead cost disadvantage is seen for the UK steelmakers for business rates. Business rates in the UK are charged on the rateable value of the company, which includes physical assets. Steelmaking equipment is very expensive and investment into new plant increases business rates even if it serves to increase efficiency or decrease emissions. Greenhouse gas emissions for UK steelmakers are taxed under the UK emissions trading scheme (ETS), which caps the industry’s emissions. The UK ETS is roughly in-line with the EU ETS and has been designed to give a seamless changeover in emissions taxes post Brexit. Emissions tax regimes are an investment burden when compared against steelmaking countries where there are no carbon taxes. Finally, significant investment barriers can be associated with geographical physical and economic factors such as land prices, power generation facilities, remediation costs for closing current plant, infrastructure and labour sources. There are several opportunities that can be exploited to encourage further domestic recycling of UK generated scrap steel. Larger market shares in domestic markets would serve to increase the amount of steel that UK steelmakers could sell, and this could be driven at a government level with steel for major infrastructure projects. Import and export tariffs have been considered an option to protect the UK steelmaking market, however evidence from other countries where this has been tried suggests while it may help the steel industry it may be detrimental to wider domestic manufacturing supply chains. A better way of steering domestic steelmakers to use more UK generated scrap steel might be to introduce an end to end supply chain carbon tax, this would not prevent international trade in steel or raw materials but it would promote supply to the lowest carbon supply routes which are often domestic. Improved sorting technologies for scrap steel will be important for increased scrap steel recycling in the UK, the research and development of these technologies is expensive, government subsidies could help to speed up the availability of the technology. Recognising and developing circular supply chains (where scrap steel from steel users is directly returned to steel makers) will help to reduce the amount of sorting required for scrap steel, increasing the efficiency of the steel recycling process. An improved relationship between UK recycling companies and steelmakers will increase the business alignment and understanding required for increased recycling, and this could be carried out through the establishment of a joint body of UK recyclers and steelmakers. Developing and implementing appropriate scrap quality monitoring tools are also needed to achieve this. Research and development will be required if there is going to be significant increase in domestic scrap steel recycling. More advanced scrap sorting technology will need to be developed which can scan, identify and sort scrap steel at faster speeds, this will give advantages in lessening the reliance on non-scientific methods for scrap sorting and better control of residual chemical elements in recycled scrap. Development of technology to pre-treat scrap before it is recycled would be helpful for advanced steel grades which require extremely low residual elements. The amount of residual elements in recycled steel increases with the number of times that the steel is recycled. Research into alternative iron sources such as direct reduced iron or hot briquetted iron can help to reduce the amounts of residuals by providing a pure iron source for steel during recycling. Lastly, increased research into scrap recycling through the electric arc furnace process itself will lead to an increased understanding of how to use scrap steel in the electric arc furnace process, leading to better quality output from the electric arc furnace steelmaking process. There is no single intervention that will encourage more domestic recycling of domestically produced scrap steel, and a range of interventions will need to be pursued. There is a significant opportunity for the UK to lead in the production of green, net-zero or low carbon steel if increased electric arc furnace steel production is pursued. This study is focused on scrap steel recycling with some touches on scrap aluminium, and an in-depth assessment on the UK scrap aluminium recycling is recommended to be carried out in the future. UK has a big opportunity/investment possibility to establish a green aluminium industry, based on the abundant supply of scrap aluminium, to meet the continuously growing domestic demand of high quality aluminium products, and to increase exporting value by exporting high quality products instead of low value mixed scrap. Significant efforts are needed to invest heavily in process technologies from scrap sorting through melting/casting to downstream processing (e.g. rolling). Government could play a critical role to provide policy incentives to promote upcycling, and create an attractive environment (electricity price, business rate) to attract investors to invest in the UK aluminium industry, and even provide financial support to the UK aluminium industry for investment in new, green technologies.