British Metals Recycling Association warns against potential steel export restrictions

The British Metals Recycling Association has warned that curtailing steel exports would be short-sighted and could result in the UK missing out on significant economic growth, with global demand for scrap steel set to boom.

The association said in an Aug. 26 statement that it had commissioned a report from researchers at Sheffield Hallam University. The report found that restrictions on British scrap steel exports -- currently being considered by the government -- could hamper the economic output of the metals recycling industry by billions and endanger jobs.

In February, the UK government announced its Plan for Steel, aimed at making the UK competitive globally by examining the electricity costs for steelmakers, unfair trading practices and the need for improved scrap metal recycling.

The UK steel industry has been lobbying the government to impose scrap steel export restrictions as it transitions to using low-carbon electric arc furnaces, citing concerns over scrap availability.

EAFs can use 100% scrap steel material mix, leading to rising domestic demand for scrap.

However, the report found that an export ban to non-OECDcountries would lead to nearly GBP5 billion ($6.7 billion) lost in gross value added and cost over 20,000 jobs.

The BMRA added that the report had found that, even if every steel furnace open today transitioned to an EAF -- as was planned by 2050 -- and only used scrap steel as its feedstock, the UK would need just two-thirds of the total annual British scrap steel supply.

"In other words, over a third of all UK scrap steel would still need to be exported," it said, which overturned any concerns over scrap availability.

BMRA CEO James Kelly said restricting exports would not just cut tonnage, but also erode the fundamental economics that sustain the sector in a globally competitive environment.

"Exports are the lifeblood of the UK metals recycling industry and global demand for recycled steel is set to rise dramatically," Kelly said. "So, curtailing exports would be short-sighted and could see the UK miss out on significant growth for an already large industry."

Lasting economic effects

Sheffield Hallam University Professor of Urban and Regional Studies Will Eadson said UK steel was a sensitive market, and the research showed how even modest policy changes to protect domestic recycled steel could have substantial and lasting economic effects.

"Our economic models demonstrate why careful thought must be given to any measures which seek to restrict overseas trade -- we can see clearly how quotas and bans may lower exports, but at a cost to the overall value of the sector," Eadson said.

Eadson said the research highlighted the need for continued and deeper dialogue between the government, metal recyclers and steelmakers to develop policy that meets the needs of all parties.

"The steel industry is going through a period of transformation, and it is important to understand how these changes will affect the people, jobs, and prosperity at the heart of our steel communities," Eadson said. "Supporting large producers through this transformation will be important to ensuring a prosperous and sustainable future, but we must also recognize the importance of the wider steel supply chain to UK prosperity and security, including the essential role played by the metals recycling sector."

The report also modeled the impact export bans would have in various policy scenarios, such as an export ban to Turkey, the UK's largest recycled metals export destination, which would result in over a GBP2 billion loss of GVA.

"These findings demonstrate that restricting recycled metal exports is not a viable solution," Kelly said.

"Even if there is significant domestic retention of the economic value created through exports and rerouting to alternative markets following a ban, the metals recycling industry never fully recovers the value it currently generates in a market which is heavily regulated, but crucially open," he added.

According to the BMRA, every 1 mt of recycled steel saved 1.5 mt of iron ore, 1.5 mt of carbon dioxide, 0.5 mt of coal, 70% of energy and 40% of water.

Platts, part of S&P Global Commodity Insights, last assessed Turkish imports of premium heavy melting scrap 1/2 (80:20) at $347/mt CFR on Aug. 22, stable day over day.