Study: Europe Needs to Scrap its Own Ships to Feed its Own Steel Mills

With Europe working to revamp its industrial sector, the availability of cost-competitive steel is a major factor. But as the European Union tightens its climate regulations, focus has shifted to the decarbonization of steel production as well. Currently, the steel industry’s carbon footprint in Europe accounts for approximately five percent of all regional emissions, which is equivalent to about 190 million tons of CO2. Thus, the steel sector is critical in EU’s decarbonization plans.

Although new technologies for clean steel production are emerging, scrap recycling is seen as low-hanging fruit. In Europe, ship recycling remains a largely untapped opportunity in steel decarbonization, according to a new report by the climate think-tank Sandbag, NGO Shipbreaking Platform and Italy’s Tuscia University.

Recent trends indicate that scrap demand is poised to rise in coming years, with steel producers trying to cut down energy consumption. One of the newer technologies using lower energy is the Electric Arc Furnaces (EAF). Notably, the technology stands out for its capacity to incorporate high amounts of recycled steel. As the report argues, ship steel could be a reliable source for scrap owing to its high quality standards.

The report projects that 11,902 European-owned vessels will be approaching end-of-life by the mid-2030s. Based on this number, ship demolitions at the time will average around 700 units per year. At this level of ship-recycling in Europe, it is estimated that 10-15 million tons of scrap steel could be recovered annually, which represents up to 20% of the annual scrap steel consumption in the EU.

However, Europe’s ship recycling industry has a long way to go. Only one percent of European ships are currently recycled in the EU bloc, yet 70-95 percent of a ship's weight is recoverable as scrap steel. Most of the European shipowners sell to South Asian yards, which offer attractive rates for scrap steel. The domestic steel market in South Asian countries has been singled out as one of the key factors for the attractive demolition rates.

The planned EU Circular Economy Act represents a critical opportunity to incentivize ship-recycling in Europe, the authors say. The priority is to create an EU-market for secondary raw materials, especially scrap in the steel sector. There are already projections that by 2050s, Europe will become a net importer of scrap steel. Ship recycling would guarantee a reliable supply chain for the secondary raw materials market.