The steel industry is under growing pressure from international investors and diplomatic initiatives to reduce emissions; this while meeting high steel demand, especially in emerging economies. Circular economy principles and low-carbon production methods are essential to achieving this agenda. Scrap metal plays a key role in this transition by enabling the use of electric arc furnaces, which have lower emissions than traditional blast furnaces and reduce dependence on raw materials and fossil fuels.

However, in the Global South, the integration of scrap into steelmaking is hindered by weak circular economy policies, supply chain inefficiencies, low competitiveness, poor tracking systems and export restrictions. The implementation of the EU’s Carbon Border Adjustment Mechanism will have a direct impact on the global steel sector and may exacerbate inequalities in the scrap market. This is especially true for low-income producers – mostly small and medium-sized enterprises (SMEs) – in the Global South.

The G20 has a pivotal opportunity to shape a more inclusive and balanced global scrap market, ensuring that this critical resource is accessible to all economies. To bridge this gap and drive systemic change, the following recommendations can help accelerate the transition to a low-carbon steel industry while fostering a more inclusive and sustainable global scrap market.

• Monitor and evaluate global scrap trade and availability: There is currently no institution responsible for mapping global scrap trends and thus little information on which to base multilateral cooperation. In 2016, the G20 formally established the Global Forum on Steel Excess Capacity (GFSEC), which is mandated to provide data and monitor global steel overcapacity. The GFSEC would be a valuable forum in this regard were its mandate extended to include tracking and monitoring of global scrap trade.
• Harmonise trade policies: Greater alignment of international regulations on scrap classification, traceability and quality standards is essential to unlock the potential of the global scrap market. In this context, G20 countries, trade organisations and regulatory agencies should engage in coordinated efforts to facilitate the fair and predictable flow of scrap across borders. Exploring pathways to gradually reduce export restrictions – while considering national circumstances – could enhance the availability of this key feedstock, especially for producers in emerging economies.
• Promote circular economies: A lack of well-defined circular economy policies limits scrap availability in many countries. Governments should implement recycling standards and extended producer responsibility regulations, and support urban mining initiatives/incentives to unlock large-scale scrap sources from macro-generators such as the O&G sector. Reforming export restrictions and establishing trade agreements between emerging economies – for example, between South-East Asia and Latin America – could strengthen supply chains and prevent resource hoarding among a few dominant players.
• Develop investment mechanisms: Mobilising international financing will be critical to support the expansion of recycling infrastructure and improve scrap-related logistics. Mechanisms such as blended finance, green bonds and public–private partnerships (PPPs) can help channel resources to where they are most needed, including support for SMEs and informal actors in the recycling value chain. Dedicated funds could prioritise the modernisation of electric arc furnaces and the development of efficient scrap collection systems, particularly in the Global South.
• Implement incentives for technological innovation: Encouraging innovation is key to improving scrap quality and its integration into steelmaking processes. Subsidies, tax incentives and increased investment in research and development can help with the deployment of advanced sorting and decontamination technologies, along with the development of international certification systems to enhance market trust and traceability. Capacity-building programmes and PPPs are key to enabling technology transfer, promoting best practices and scaling up sustainable production practices in low- and middle-income countries.
• Global Alliance for Steel Scrap: G20 member countries have a strategic opportunity to spearhead South–South collaboration by establishing a Global Alliance for Steel Scrap, aimed at advancing circular economy policies and harmonising scrap trade regulations to build an equitable and sustainable global scrap market. Countries with significant steel production and recycling capacities, such as China, India, Brazil and South Africa, could work together to develop best practices and remove trade barriers. A key example of this collaboration is the ship recycling industry, where nations like India and Bangladesh have established themselves as major players in processing end-of-life ships for scrap steel. Such an alliance could encourage knowledge sharing, investment in scrap-processing infrastructure and capacity building for SMEs in the Global South. In partnership with international organisations (eg, UNIDO, UNEP, WTO, OECD), the private sector and civil society, it would support a fair and efficient scrap market and contribute to global steel decarbonisation. The alliance would be a neutral and technical cooperation platform that advances international guidelines, coordinates financing for recycling infrastructure and promotes pilot projects for innovation and knowledge exchange.

Decarbonising the steel industry demands a holistic, collaborative approach that integrates circular economy principles, fair trade policies and technological innovation. By advancing global cooperation on scrap markets, strengthening circular economy policies, promoting more balanced trade practices and investing in cleaner technologies, the G20 can accelerate the transformation of a more sustainable and low-carbon steel sector.