More companies will invest in electric-arc furnaces (EAFs) as part of their green transition, which will likely result in more demand for scrap amid tighter scrap supply in the medium term, market participants said at an industry conference in Istanbul today.
The shift toward EAF production globally is set to boost scrap consumption, and could limit the availability of scrap for export markets. The majority of Turkish steel production is EAF based, with most new capacities coming on line also scrap-based. Potential legislative changes, such as those proposed in the UK to restrict scrap exports and protect local supplies, could further tighten the market supply.
Such restrictions, coupled with rising scrap consumption, could intensify competition. Major steel producers in the EU and the UK are also transitioning to EAF production, significantly increasing their domestic scrap demand, resulting in suppliers focusing less on exports. Turkey has traditionally relied on imported scrap.
Turkey should explore integrated production methods and consider hydrogen-based steel production systems, the general manager of Cag Celik Ercument Unal said. Adopting direct-reduced iron (DRI) technology would reduce the need for scrap, but will increase the demand for iron ore.
Turkish steel producer Tosyali Holding anticipates globally hydrogen-based methods will account for 22pc of total steel production by 2050, following scrap-based methods, which are expected to contribute 40pc.
There were no major changes in the steel production methodology in the past 50 years, except for some developments in automation and minor energy savings. However, current developments in hydrogen use will be more significant, Tosyali said.
Tosyali recently completed its second DRI plant at its Algeria site and is currently building a third DRI, which will use 100pc hydrogen in production. "Every investment we make today regarding the green transition will be more economical than the trade measures we will face tomorrow," Tosyali chairman Fuat Tosyali said.
Turkey has great potential for solar energy to produce hydrogen, director of Huawei Smart PV Turkey Eray Hazer said. One of the major Turkish mills bought 1GW of capacity, but this is only enough to cover 10-15pc of its production, so in order to generate enough electricity to run the DRI, higher solar power installation is required.
There are a number of risks which can affect the Turkish steel industry, South Korean steelmaker Posco research and development deputy manager Dr Kisoo Kim said during the conference, including reduced exports due to the implementation of the EU's Carbon Border Adjustment Mechanism (CBAM), rising scrap demand causing supply shortages, and notably high output costs to produce green electricity. The latter could be eased by considering the nuclear power option as a bridge solution if public approval is achieved, he added.
