Circular transformation of the European steel industry renders scrap metal a strategic resource

The steel industry accounts for 7% of global carbon dioxide emissions. The European Union aims to reduce these emissions by replacing basic oxygen furnaces with electric arc furnaces (EAFs). This transition requires stable access to high-quality scrap as a strategic resource. Using international trade data, national production balances, and firm-level business data, we examine scrap metal supply from multiple empirical perspectives. First, we estimate national scrap consumption from trade data and material balances, showing that fluctuations in steel output closely track changes in scrap use in import-dependent countries. Second, we analyse bilateral scrap trade relationships using a regression-based approach that separates exporter- and importer-side responses, allowing us to identify dominant buyers and structurally important trade links. The analysis shows that the European scrap trade is driven by a few major buyers, such as Germany, Italy, and Türkiye, while several exporters connect them and may become potential bottlenecks. Third, by relating trade exposure and firm-level indicators of scrap-related activity to EAF capacity, we show that higher capacity systematically coincides with greater imports and a larger population of scrap-related firms. These findings highlight how scrap metal emerges as a strategic resource through the combined effects of trade structure, industrial organization, and production capacity, providing a data-driven basis for assessing supply risks in Europe’s transition to a circular steel economy. • Scrap metal emerges as a strategic resource in circular steelmaking. • European scrap import competition is concentrated among a few buyers. • Key exporters supply multiple importers and act as bottlenecks. • EAF capacity explained by trade and firm-level data on scrap-related enterprises. • Regression predicts 730 firms, 35k jobs, USD 35B turnover for planned EU EAF growth.