Cost Efficient Scrap Metal Sourcing

Sammanfattning: The steel industry in Sweden is responsible for 10% of the annual Swedish CO2 emissions. As a way to abate this sector, H2 Green Steel are establishing a new green steel production site in Boden. Their way of producing steel, through the EAF route and by using hydrogen-reduced DRI will reduce the CO2 emissions by over 90%. Besides iron ore, steel scrap is the most important input raw material for the EAF production. Scrap is generated where there is industry and society, meaning the local supply in northern Sweden is very limited. H2 Green Steel is therefore going to source a major share of the scrap in continental Europe and the UK, incurring additional logistical costs compared to their European steel competitors. This thesis investigates the European scrap market and the scrap logistics to find the best sourcing strategy for H2 Green steel. The methodology used is exploratory design science research, implying a wide problem solving approach to find a context specific solution. Data is gathered through industry reports and many interviews with industry experts as there is limited academic research available. The research shows that the scrap market is complex, with a high level of subjectivity regarding availability, quality, and efficient logistics. The largest scrap volumes are generated in Germany and the UK, and exported from Benelux and the UK. As scrap is a low value voluminous product, it is best transported in bulk vessels and bulk trains. The qualitative research resulted in a number of hypotheses regarding the best transportation options, the best origin harbors and regions to source from. These sourcing routes were then quantitatively investigated by using transportation cost data from a number of partner sea- and train freight companies as well as handling cost data from interviews with stevedore companies. The data was then extrapolated to make additional estimations. Based on both qualitative and quantitative analysis, the recommendation is to utilize 35k DWT bulk vessels from Rotterdam and/or Amsterdam and Tilbury in the UK. Also, a 16k DWT bulk vessel from Gdansk and a 2k bulk train from Rheinkamp (in the Ruhr-area in Germany) is recommended. The train option is more expensive, but is important as it can provide high quality scrap directly from the automotive industry, reduce the bottlenecks of Luleå hamn and improve logistics sustainability. The recommendation also includes building strong supplier relationships to secure volumes and scrap quality, and minimizing sea freight during winter due to the more expensive ice-classed vessels required. Overall, the recommendation emphasizes the need to act on the strategy to secure volumes now, before scrap demand in Europe rockets.