Britain exports around 8 million tonnes of scrap steel annually, while importing higher value steel products.

Whilst UK steel demand is projected to grow by 54 per cent by 2050, driven by housebuilding, offshore wind deployment, electricity network expansion and the growing automotive demand for lower-carbon steel, to fully meet this demand domestically, the UK would require more than two Port Talbots’ worth of additional electric arc furnace capacity, to avoid greater dependence on imported steel. Steel demand from electricity infrastructure alone is projected to grow by around 12 per cent per year, on average, to 2050.

New research from the Energy and Climate Intelligence Unit (ECIU), drawing on analysis conducted by CBI Economics, finds the UK already generates enough scrap steel to support a significant expansion of domestic steelmaking, but currently exports around 75 per cent of that scrap steel each year because it lacks sufficient recycling capacity.

Jess Ralston, head of energy at ECIU, said: "Britain has the ingredients needed for a steel revival. We have growing demand from housebuilding, offshore wind, electricity networks and the automotive sector. We generate millions of tonnes of scrap steel every year. With taxpayers now having a direct stake in major parts of the industry, there is an opportunity to build on these rescues with a long-term industrial strategy."

The report, The UK’s Scrap Gap, also finds that electric arc furnaces are significantly cheaper and faster to build than new blast furnaces and are capable of producing the grades of steel increasingly required by modern manufacturing supply chains.

The analysis identifies pressures behind the sector's decline including Chinese state-supported overcapacity and the UK’s high energy costs. However, it suggests that growing demand for low-carbon steel and the UK's abundant scrap resources create a significant opportunity to rebuild domestic capability if investment decisions are taken soon.

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