The UK wants a cleaner steel industry – but its plan rests on a supply chain that doesn’t exist yet
Around the world, countries are seeking to build greener, more circular economies. Steel is central to that ambition. It is still one of the most widely used materials – but producing it is one of the largest industrial sources of carbon emissions worldwide.
The UK domestic steel industry is the smallest it has been since the 1930s. Production fell to 4 million tonnes in 2024 and 70% of the country’s steel is imported. Despite this, the government’s new steel strategy is hugely important for the country’s future prosperity.
The UK is decisively moving from blast furnaces to electric arc furnaces (EAF), producing “circular steel” from scrap. On the face of it, the plan is compelling. It should align with UK strategies for its economy, national security and progress towards net zero.
The strategy requires the state to take an active role – buying more domestic steel, reducing import quotas and subsidising the UK’s high electricity costs. Perhaps above all, it rests on the assumption that scrap steel, most of which is exported, can be redirected to feed this new generation of EAFs.
Making this shift will require significant changes to pricing and processing systems. The UK generates around 10-11 million tonnes of steel scrap each year and exports roughly 80% of it. Per capita, it is the world’s largest scrap exporter. Only about 2.6 million tonnes is consumed by domestic steelmakers.
The new strategy relies on far more of this scrap staying in the country. But this would mean disrupting a business model that generates an estimated £9 billion a year in gross value added. A 2025 EU analysis noted that China’s plans to increase scrap-based production could require an additional 45 million tonnes of scrap globally. Rising international demand will push scrap prices up, making export even more attractive.
Ultimately, it is this scrap flow (where scrap is stored and treated) that will determine whether the economic and environmental potential of the strategy can be realised.
The power problem
A 2025 industry report uncovered a perplexing challenge: it is cheaper to export steel scrap and re-import finished steel products than to process and manufacture in the UK. The report called for investment in UK processing infrastructure: advanced scrap sorting, shredding, and refining to remove contaminants, as well as updated rules and oversight across the recycling supply chain.
European steelmakers such as Voestalpine and recyclers like TSR have already invested in the scrap sorting and processing infrastructure to meet the requirements of electric arc furnaces.
Using scrap steel might appear to be an obviously sustainable option, but there are complications. EAF steelmaking produces around 75% fewer direct carbon emissions than via a blast furnace but it uses vast amounts of electricity.
The sector’s electricity consumption is expected to double – and UK industrial electricity prices are 27%-38% higher than in France or Germany. Environmental and economic performance depends on the whole scrap chain – sorting, processing, removal of contaminants – not just the furnace technology.
For example, in separating different types of scrap, workers are potentially exposed to hazards from mixed materials such as batteries. Not only that, but poorly sorted scrap can result in lower-quality steel and generate hazardous residues in the slag.
Intriguingly, many of the assumptions of the new steel strategy can be tested against history. In 1972, the Sheerness steelworks in Kent became Britain’s first scrap-fed EAF mini-mill. By early 1980, the Financial Times reported this private steelmaker had productivity four times that of the publicly owned British Steel Corporation (BSC). More than half of its output was exported.
Then came the 1980 steel strike and other industrial relations challenges, market liberalisation and globalisation. Ownership at Sheerness passed from Co-Steel International of Canada to Allied Steel & Wire (ASW) in 1998, a company that was already in debt.
By 2002, ASW was in administration and Sheerness closed. A Saudi-backed company, Thamesteel, reopened the site in 2003 and installed a high-capacity EAF. But by 2012, Thamesteel was also in administration. The EAF was dismantled and shipped to Newport in south Wales.
But despite this conclusion, the fact remains that the technology worked. The plant was productive and profitable for many years. What kept shifting was the system beyond the furnace – electricity costs, scrap supply, government policies, UK market structures and global competition. Today the site is a car park for imported vehicles.
Whether the UK steel strategy succeeds will be determined by the unglamorous work of closing this scrap gap – better sorting, processing infrastructure and logistics. Meanwhile, the UK is competing in a global market where scrap prices are set by forces well beyond its control. Facing that fact, and not just the shiny furnaces, is where the strategy will be won or lost.
Michael A. Lewis currently receives funding from the AHRC.
Annika Skoglund received funding from the Swedish Foundation for Strategic Research.