EU's need to raise steel output requires millions of tons of extra scrap: think tank

The EU must boost crude steel production 12%-13% by 2027 to counter falling imports triggered by steel safeguards and the Carbon Border Adjustment Mechanism, but meeting this target and rolling out new electric arc furnaces will require an additional 8 million-11 million metric tons of steel scrap later this decade, Stanislav Zinchenko, CEO of Kyiv-based think tank GMK Center, told Platts, part of S&P Global Energy.

The EU was importing 7 million mt/year of long rolled steel before, with half of that tonnage produced via the blast furnace-basic oxygen furnace steelmaking route. Now, because of the safeguards and CBAM, this volume is likely to be replaced by EU-based scrap-intensive EAF production, he said.

To replace the expected decline in steel imports, the required 12%-13% growth by 2027 in EU crude steel production, from 2025 levels, will need an extra 4 million-6 million mt of steel scrap. Then, by 2028, the commissioning of new EAFs could further boost domestic scrap demand by 4 million-5 million mt, according to Zinchenko.

Key already-announced EAF projects represent significant new capacity, he said. They include Metinvest's 2.7 million mt greenfield plant in Piombino, Italy; Voestalpine's 2.5 million mt projects in Linz and Donawitz, Austria; Marcegaglia's 2.1 million mt unit in Fos-sur-Mer, France; ArcelorMittal's 2 million mt EAF in Dunkirk, France; and NLMK's developments in Verona (+0.5 million mt) and Belgium.

These are set to be predominantly scrap-fed facilities — at least during the initial years, until there is sufficient cheap supply of direct reduced iron/hot briquetted iron on the EU market, Zinchenko said, adding that together the projects will generate an additional annual demand of up to 5 million mt of scrap once operational.

"We are seeing a clear, pragmatic trend in which steelmakers are prioritizing scrap-based EAF capacity additions over capital-intensive DRI-hydrogen concepts," he said.

However, Zinchenko's scrap consumption forecast is still based on a mix of scrap with DRI/HBI and assumes non-maximum capacity utilization, as the new EAFs' future run rates are currently unknown. As for the mix composition, it will depend on market prices of several metallic feedstocks and could vary from quarter to quarter.

Higher future demand should uphold domestic European prices of scrap and potentially boost its collection, Zinchenko said, but from today's viewpoint, meeting inflated requirements with local supply poses a challenge, as the EU continues to lose a double-digit stream of scrap through exports, net exporting 11.5 million mt to third countries in 2025 alone.

In 2027, the situation could change, though. The European Commission is looking to reduce EU annual exports of steel scrap by 4 million-4.1 million mt, or 25%-26%, from 2025 levels, having proposed cutting off the majority of non-OECD countries from EU scrap metal supplies as of May 21, 2027. On Sept. 18, the commission presented a respective draft delegated act under the revised Waste Shipment Regulation.