With the importance of scrap increasing with the transition to green the economy, it is expected that “scrap wars”, as a new form of trade wars, will be on the agenda in the coming years, according to the “Steel Sector Overview 2022” report published by audit, tax and advisory services agency KPMG Turkey.
KPMG Turkey noted that China, US, the European Union and Turkey are the highest scrap consuming markets. While China uses all the scrap it produces, the EU, US and Japan are among the largest scrap exporters in the world. Turkey - which has lower emission rates, as more than 75 percent of its steel production is by scrap-based electric arc furnaces - imports almost 80 percent of the raw material from the EU, the US, Japan and Russia, and so the shortage of scrap supply may destroy the technological advantage of the Turkish steel industry.
According to KPMG’s report, with the trend of steel production from scrap in line with the zero carbon emissions goals worldwide in recent years, and with EAF investments coming to the fore, it is forecast that China, the US, the EU and Russia will aim to keep scrap in their domestic markets in the coming years, will impose restrictions on scrap trade, and that large price increases will be recorded. This may negatively affect Turkey’s competitiveness and cause difficulties in domestic steel production. KPMG Turkey states that the Turkish steel industry should focus on increasing its raw material resources.
In addition, it is thought that the sanctions imposed on Russia by many countries, especially by Europe, after Russia’s invasion of Ukraine, may create new market opportunities, as well as providing a quota advantage to Turkish steel producers, which are rivals of Russia in the European market, and may contribute positively to Turkey’s exports. On the other hand, there will be some negative impacts from the war on the Turkish steel industry in the short and medium terms, such as disruptions in scrap supply. Meanwhile, Russian steel producers are applying aggressive price policies especially in Turkey as their export markets, especially in European countries, are shrinking, which negatively affects the competitiveness of Turkish steel producers.