Global scrap metal demand will grow in the coming years, causing increased demand across various industries such as automotive, construction, and ESG considerations favouring the recycled materials used to alleviate carbon emissions.
FREMONT, CA: As the environmental, societal, and governance (ESG) focus shifts to the mining and metals sector, there is increased interest in recycling as a source of green metals. The ideas around the circular economy, where all aspects of the economy are repurposed and reused, align with recycling. At the same time, high commodity prices make the often resource-intensive process of sorting and processing scrap more economically viable.
Smelting scrap metal for recycling requires considerably less energy than the initial process of refining raw minerals into metals, resulting in lower emissions. This highlights that the aluminium and steel industries are estimated to contribute two and seven per cent of all global carbon emissions.
Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.
The transformation of global supply chains by the pandemic and geopolitical conflicts has highlighted interdependencies and downsides, leading countries to look inward for sources of commodities, including potential scrap uses.
Global demand for scrap metal will remain strong over the upcoming year, owing to increasing demand for metals across various industries, including automotive and construction, and ESG considerations favouring using recycled materials to reduce carbon emissions.
For instance, in its Circular Aluminium Action Plan, the European aluminium industry has set a target to satisfy 50 per cent of EU aluminium demand using recycled materials in the coming years, compared to the current 36 per cent level. With the strong scrap metal demand and its importance for metals production, many countries have sought to reserve their domestic scrap supplies for their metals processing industries, including by taxing or preventing scrap metal exportation.
Research reveals that approximately 40 per cent of globally traded copper waste and scrap, 30 per cent of aluminium and 20 per cent of iron and steel waste and scrap will encounter some form of export restriction. The downside of these restrictions is that they increase the domestic raw material supply, thereby reducing costs. Some trade authorities consider that they provide unfair benefits to downstream users of such raw materials. This paved the way for the imposition of countervailing duties on imports of downstream products.
Export restrictions on scrap metal are common, and many countries impose significant import restrictions on scrap metal. Moreover, few countries have imposed import prohibitions or quotes on scrap metal, and the applied most favourable nation (MFN) tariff rates on scrap metal are relatively low. Scrap metals have rarely been the target of trade remedy measures, including antidumping, countervailing duty, and safeguard measures.
In many countries, metal smelting from scrap depends on fossil fuels, especially coal or natural gas. Although the process requires considerably less energy than creating metals from raw materials, consumers increasingly look at metal products manufactured in greener ways. Although the trend toward electrification is growing and green energy sources are increasing, most of the power available on the grid in most counties will be sourced from fossil fuels. Moreover, green hydrogen is not yet widely available.
With the market currently limiting the premium on green metals, it remains to be seen whether the market will recognise and prepare to pay an additional premium for recycled metals, having had a completely green life cycle.
