The European Commission's newly unveiled Steel and Metals Action Plan has ignited a critical conversation about the future of ferrous scrap trading. At its core, the plan seeks to increase the use of recycled metals within the EU as part of the bloc's broader decarbonization and circular economy goals. But for global scrap traders, recyclers, and manufacturers, it signals a looming disruption in scrap availability and pricing. 

The EU's Circular Economy Push

The EU's plan outlines a two-fold approach: first, stimulate internal demand for recycled metals, and second, explore limits on scrap exports. The rationale is clear - recycling aluminum and steel can cut energy use by up to 95% and 80% respectively compared to primary production. However, with approximately 20% of EU-generated scrap currently being exported, and external buyers often offering higher prices, this "scrap leakage" is at odds with Europe's goal to reduce reliance on primary raw materials.

The European Commission is considering a suite of trade measures, including export duties, export bans to non-OECD countries, and a 'reciprocity rule' that would only allow exports to countries that permit EU imports in return. These proposals are part of a broader effort to secure critical secondary raw materials for EU industries, particularly in green manufacturing sectors such as electric vehicles and sustainable construction.

Global Ramifications

For countries like India, the EU’s proposed restrictions are more than a policy shift—they’re a potential roadblock to green industrial growth. India heavily relies on steel scrap imports for its electric arc furnace (EAF)-based steelmaking, which is significantly less carbon-intensive than traditional blast furnace methods. With an average carbon intensity of just 0.4–0.8 tonnes of CO2 per tonne of steel (versus 2–2.5 tonnes from blast furnaces), EAFs are crucial for India’s climate goals.

India’s Ministry of Steel and other stakeholders have already flagged these EU restrictions as trade-distorting and counterproductive. As scrap access tightens, developing economies may be forced to revert to more polluting production methods, undermining global decarbonization efforts.

Why Hedging Matters Now More Than Ever

For ferrous scrap traders and downstream steel manufacturers, the risk of restricted flows, volatile pricing, and shifting trade dynamics makes hedging not just an option - but a necessity. Here’s why:

• Price Volatility Is Inevitable: Any move to restrict exports will tighten global supply and likely drive up prices. Traders exposed to spot market swings risk seeing margins erode overnight.

• Supply Chain Risk Is Rising: Reduced access to EU scrap - especially for non-OECD countries - means firms must secure alternative sources or lock in pricing now to mitigate future scarcity and upwards price shocks

• Regulatory Timelines Are Short: With feasibility studies and policy decisions expected as early as Q3 2025, the window to prepare is closing fast.

A Strategic Moment for the Industry

The EU’s plan is not just about sustainability - it’s about control. By seeking to limit outbound scrap flows, the bloc is positioning itself to support its green transition at the possible expense of global free trade. For scrap traders and steelmakers across the world, this makes it urgent to build resilience through strategic sourcing and hedging. With proposed export restrictions now very much on the table, it's imperative that ferrous scrap traders reassess their risk exposure and implement hedging strategies to protect margins and ensure supply security.

Don’t wait for the policy dust to settle. Reach out to Pillar today and learn how we can help you turn today’s volatility into tomorrow’s competitive advantage.