Shortfalls in Scrap Will Challenge the Steel Industry

The global supply of carbon steel scrap is in a losing battle against demand growth. This crisis has been in the making for many years, and the pattern will continue unabated. According to an analysis by Boston Consulting Group (BSG), global scrap demand will increase at about a 3.3% compounded annual growth rate (CAGR) over the next eight years, while supply will rise at only about 3% CAGR. 

A boost in demand will in part be the result of scrap increasingly becoming a material of choice for steel production, especially as industries attempt to reduce carbon emissions from their raw materials. By volume, scrap will account for 50% of the global iron content in steel by 2030, up from 35% today. By that point, annual scrap consumption in both China and the US will likely be 40% to 50% higher than today, much of it to make more steel. And these increases in domestic demand for scrap by major steel producing countries will reduce the global scrap trade by about 15%. By 2030, today’s 9 million metric ton steel scrap surplus will become a 15 million metric ton deficit, further underscoring why neglecting the problem is not an option. Such a drastic change in steel industry dynamics will greatly impact steel manufacturers and scrap metal providers—some a lot more than others—who must take steps to prepare for the new landscape.