The UK's annual steel scrap exports could decline by approximately 50 percent by 2040 as the country's transition toward electric arc furnace (EAF)-based steelmaking increases domestic scrap consumption, according to a new report published by the Energy and Climate Intelligence Unit (ECIU).
The report, titled The UK's scrap gap, indicates that the country generates approximately 10-11 million mt of steel scrap annually but currently consumes less than 25 percent domestically, exporting around eight million mt. As new EAF capacities become operational, domestic scrap demand is projected to increase approximately threefold, creating opportunities to retain more recycled steel feedstock within the country.
UK scrap consumption could reach 6.7 million mt by 2040
According to projections cited in the report, domestic EAF scrap consumption is expected to increase from approximately 2.2 million mt in 2024 to 6.7 million mt by 2040. Meanwhile, scrap exports are projected to decline from 7.8 million mt to 3.9 million mt over the same period.
Despite the anticipated increase in domestic consumption, the UK is expected to maintain a substantial scrap export surplus.
The report also highlights challenges associated with scrap quality. Demand for high-quality, low-copper scrap is expected to increase sevenfold to eightfold as new EAF facilities begin production, reflecting the stricter feedstock specifications required for flat steel products. Existing scrap sorting and processing infrastructure, together with regulations governing end-of-life vehicles, could constrain the availability of suitable material.
UK steel demand forecast to increase 54 percent by 2050
The report projects that UK steel demand will increase by 54 percent, from 9.1 million mt in 2025 to 14 million mt by 2050, supported by construction, offshore wind, electricity transmission infrastructure and automotive manufacturing.
However, expected domestic steel production capacity is projected to reach approximately 6.7 million mt following the industry's transition, leaving a potential supply shortfall of 7.3 million mt by 2050. The report estimates that closing this gap entirely would require additional EAF capacity equivalent to more than twice the capacity of Tata Steel's Port Talbot EAF project.
The report also estimates that the UK steel industry's EAF share, which stood at approximately 38 percent in 2025, could increase to 75-85 percent once the expected investment pipeline becomes operational.
Electricity costs remain a challenge for UK EAF producers
The report identifies electricity costs as a significant competitive challenge for UK steelmakers. During 2025-26, domestic producers paid approximately 27-38 percent more for electricity than their counterparts in Germany and France.
This translated into an estimated EAF production cost disadvantage of £6.10/mt compared with Germany and £7.90/mt compared with France, before accounting for other operating cost differences.
Nevertheless, the report estimates that EAF-based steel production in Western Europe costs approximately £49/mt less than blast furnace-based production before carbon pricing.
The ECIU report concludes that the UK's substantial scrap availability, projected steel demand growth and ongoing EAF investments provide a basis for expanding domestic steel production. However, the outcome will depend on investment decisions, electricity costs, scrap processing capabilities and the development of the regulatory and procurement framework.
