‘Scrap wars’ replace trade wars amid decarbonisation: KPMG

Steelmaking decarbonisation will lead to scrap trade restrictions, resulting in “scrap wars” that will significantly lift prices of the feedstock and impact Turkish mills’ competitiveness, KPGM says in its “Steel Industry Outlook – 2022” report.

The consultancy predicts the trend of steel production from scrap, in line with the global zero carbon target and the tendency of China, the USA, EU and Russia to keep their own scrap in their domestic markets may cause significant price increases in the coming years.

This situation may negatively affect Turkey’s competitiveness and cause problems in Turkish steel production, the report says. “We expect the importance of scrap to increase with the green economy, while scrap wars as a new version of trade wars will be on the agenda in the coming years.”

“The steel sector is one of the most prominent sectors in the fight against climate change due to its high carbon emissions during production,” KPMG Turkey metal and mining sector head Burak Yıldırım is quoted as saying by local media. “There are basically two types of technologies used in steel production. The first of these is ore-based production in basic oxygen furnaces. High carbon emissions occur in this production. The second type of production is scrap based production in electric arc furnaces. In this production, very low emissions occur when steel is produced from scrap.”

In this context, Yıldırım says the most viable way to reduce emissions in the short term seems to be to shift from ore-based production to scrap-based production, Kallanish notes.

“Turkey mainly has a technology that produces cleaner iron and steel, and our emission rates are lower. Although this situation seems to be a serious advantage for Turkey, Turkey is not an economy that can produce enough scrap like developed economies and imports almost 80% of the raw material used in production. In this sense, Turkey is an import-dependent country and the supply shortage in scrap may destroy our technological advantage. It has become a necessity for us to focus on how we can increase raw material sources and diversity. At the same time, new markets will need to be well defined,” Yıldırım concludes.

Burcak Alpman Turkey