The EAF Revolution: Demand Has Permanently Shifted
Global crude steel production reached 1,883 million tonnes in 2024, with roughly 630 million tonnes (33%) produced via electric arc furnace routes using ferrous scrap as primary input (FACT: BIR World Steel Recycling in Figures, September 2025). The OECD projects scrap's share must rise to 45-50% by 2050 to meet climate targets (FACT: OECD, December 2024).
In the United States, EAF production now accounts for over 71% of total steel output, the highest share among major steel-producing nations (FACT: AISI, May 2026). Nucor, Steel Dynamics, and new entrants have added approximately 5 million tons of EAF capacity since 2024. Each new EAF flat-mill consumes 1-1.5 million tons of scrap annually.
The structural driver is unambiguous: integrated BOF steelmaking is in decline due to carbon costs and regulatory pressure. Every new mill built in North America and Europe is EAF-based. This permanently raises the scrap demand floor.
Where the Consensus Is Wrong: Scrap Is Not a Free Market
The prevailing narrative positions scrap as a cyclical commodity that follows global steel production. This understates how regional scrap markets are. Unlike iron ore, which trades freely on seaborne markets, scrap moves within tightly constrained logistics corridors.
US scrap exports totaled approximately 17 million tonnes in 2025, primarily to Turkey, Mexico, and India (FACT: US Census Bureau, 2026). Turkish scrap import dependency (over 80% of its feed) means Turkish demand directly competes with US EAF mills for prime grades.
The quality gradient is widening. Prime scrap is increasingly scarce as EAF mills require higher-quality feed for flat-rolled products. The spread between prime and HMS has widened from $40-50/gt to $80-100/gt since 2023 (FACT: Fastmarkets, Q1 2026).
Supply Constraints: Collection and Metallization Limits
Scrap supply is constrained by collection infrastructure, not mining capacity. Approximately 630 million tonnes were recycled globally in 2024, representing a recycling rate of roughly 85% for end-of-life steel (FACT: BIR, 2025).
In North America, prompt industrial scrap generation has declined as manufacturing moves offshore. The US generated an estimated 70 million tonnes of obsolete scrap in 2025, but collection efficiency varies by region (FACT: ISRI, 2026). The Southeast, where most new EAF mills are located, has the lowest scrap generation density.
DRI/HBI capacity for EAF mills is growing but from a low base. US DRI capacity is approximately 8 million tonnes, with only 2 million tonnes merchant (ESTIMATE: Midrex, 2025). Scrap remains the dominant charge material.
Regional Breakdown: The Fragmented Scrap Landscape
North America: Tightening rapidly. Three new EAF flat mills under construction will add approximately 4.5 million tons of scrap demand by 2028. Prime scrap is already in deficit. Buyers should lock in prime scrap supply contracts with 12-24 month terms.
Europe: Stably tight due to export demand from Turkey. EU scrap export restrictions are under discussion but not enacted. CBAM exemption for scrap creates incentive for intra-EU retention. E3 grade at EUR 350-400/mt.
Asia: Largest scrap consumer globally at approximately 250 Mt/yr, but heavily import-dependent. India's scrap imports rose 15% in 2025 to approximately 10 Mt. China's scrap use increased to approximately 220 Mt as EAF share reached 12% (FACT: BIR, 2026).
Middle East and Turkey: Turkey is the world's largest scrap importer at approximately 22 Mt/yr. Any Turkish restocking cycle tightens global supply (FACT: Turkish Statistical Institute, 2026).
What We Do Not Know
The pace at which new DRI/HBI capacity can reduce demand for prime scrap. Several DRI projects are planned but few are financed (ESTIMATE: Midrex, 2026).
Whether the US will impose scrap export restrictions, as some industry groups have proposed (ESTIMATE: ISRI position paper, 2025).
The impact of IRA 45Q tax credits for carbon capture on the relative economics of scrap versus DRI-based steelmaking (ESTIMATE: DOE, 2025).
Procurement teams purchasing scrap steel in 2026 should prioritize supplier diversification, lock in annual volumes where possible, and monitor the shifting trade policy landscape. The structural themes outlined above will play out over 12-24 months, creating windows for renegotiation and hedging alike.