The Circular Trade Paradox: How Global Scrap Metal Flows Reveal an Invisible Crisis in Green Industrial Policy

By Martin Chen Aug. 6th

For decades, policymakers have promoted the circular economy as a cornerstone of the global green transition. From the European Union’s Circular Economy Action Plan to the United Nations Environment Programme’s Resource Efficiency initiative, nations are increasingly imposing restrictions on raw material exports in the hope of fostering domestic recycling industries. Yet beneath these green aspirations lies a paradox: restrictions on scrap metal exports, meant to strengthen circularity, are distorting global markets, encouraging black-market trade, and increasing carbon emissions. What appears as environmental protection on paper has quietly evolved into a fragmented web of contradictory incentives, where the movement of recycled metals across borders is dictated less by sustainability than by regulatory loopholes and opportunistic arbitrage.

The Global Scrap Economy

Scrap metal is the lifeblood of modern green industries. Roughly 40% of global steel production and 35% of copper output now rely on recycled material rather than virgin ore. According to the World Bank, global scrap trade surpassed 220 million metric tons in 2023, valued at over US$140 billion—a figure nearly double that of 2010. Yet, despite the material’s centrality to decarbonization, the market remains politically entangled. The European Union, the world’s largest exporter of scrap, has been considering a 2024 regulation to limit exports of ferrous and non-ferrous scrap to non-OECD nations. The measure was justified as protecting “strategic raw materials” for domestic green industries. But the outcome may not match the rhetoric.

The EU’s proposal follows a global trend: India, Indonesia, and Turkey have all tightened scrap export or import rules in recent years, arguing for environmental self-sufficiency. India’s 2019 “Steel Scrap Recycling Policy” established new domestic recycling centers, but simultaneously restricted imports of low-grade scrap, leading to an unintended price surge. Turkey, the second-largest importer of ferrous scrap globally, imposed export bans in 2021 to shield domestic mills from supply volatility. Meanwhile, China—once the world’s biggest scrap importer—shifted course entirely by restricting imports in 2019, citing pollution concerns, only to reverse course in 2021 when domestic demand outpaced supply.

Such oscillations have not created a circular economy; they have created a fragmented one.

When Green Policy Meets Grey Markets

The paradox of these restrictions becomes clear when observing trade data. In theory, limiting exports of scrap metal should encourage domestic recycling and manufacturing. In practice, these restrictions have pushed scrap flows underground. The OECD 2023 Resource Efficiency Report estimates that up to 15% of global scrap exports bypass official trade channels, largely due to tariff evasion or mislabeling as “waste.” Much of this black-market flow goes from the EU and the United States to South and Southeast Asia, where environmental standards are lower and recycling is less regulated.

For instance, when China’s import restrictions on mixed metal scrap took effect in 2019, exports to Malaysia surged by 224%, and to Indonesia by 163% within a single year. These countries, lacking the infrastructure for safe smelting, became de facto waste-processing hubs for developed economies. The Basel Action Network, an environmental watchdog, notes that such “waste tourism” leads to higher net global emissions due to inefficient re-smelting and transportation. Ironically, by restricting the export of scrap to promote domestic recycling, nations have merely shifted pollution elsewhere.

Economic Distortions and Inflationary Pressures

The unintended macroeconomic impacts of these restrictions are significant. The World Steel Association reported that the average global scrap steel price increased from US$310 per metric ton in 2020 to US$475 in 2022, a 53% increase, partially fueled by export curbs and localized scarcity. For industries dependent on recycled inputs—automotive, construction, renewable energy—the ripple effects have been acute. The cost of aluminum ingots in the EU rose by 18% in 2023 following proposed export limits. Analysts at BloombergNEF project that, if current trade restrictions continue, the global price of recycled copper could exceed US$10,000 per ton by 2026, undermining cost parity with mined copper and thereby weakening incentives for decarbonization.

Moreover, policy misalignment amplifies these pressures. Countries that restrict exports often lack domestic capacity to process the retained scrap efficiently. In Eastern Europe, nearly 30% of collected ferrous scrap remains unused annually due to insufficient smelting capacity. The result is an ironic “circular backlog”—stockpiles of recyclable material rotting in warehouses while downstream industries import refined metals at higher carbon costs.

The Carbon Leakage Problem

From a climate perspective, export restrictions can perversely increase emissions. A 2022 study by the International Energy Agency (IEA) estimated that secondary steel production emits only 0.4 tons of CO₂ per ton, compared with 1.9 tons for primary steel. Yet, when scrap remains unprocessed due to export bans, nations resort to primary steel imports—effectively multiplying emissions fivefold. Furthermore, when scrap is illegally rerouted to countries with lower efficiency, such as Vietnam or Bangladesh, total life-cycle emissions rise by an additional 15–20%, according to data from the University College London’s Material Efficiency Lab.

These inefficiencies illustrate a deeper flaw in the design of green industrial policies: environmental goals are being pursued through territorial protectionism, rather than transnational coordination. The green transition cannot succeed if each country hoards its recyclables under the guise of sovereignty while others bear the ecological cost.

Policy Crossroads: The EU’s Dilemma

The European Union’s Waste Shipment Regulation (WSR) revision is a prime example of this dilemma. Under the 2024 draft, the EU intends to prohibit scrap exports to non-OECD countries unless “equivalent environmental standards” are demonstrated. While the regulation seeks to prevent environmental dumping, its definition of equivalence is vague and largely unenforceable. The European Recycling Industries’ Confederation (EuRIC) warns that the policy will reduce Europe’s scrap export volume by up to 40%, causing a “market glut” and depressing domestic collection incentives. Meanwhile, European mills already operate near full capacity and cannot absorb the surplus.

If enacted, the policy could paradoxically reduce recycling rates, as collection systems collapse without export outlets. Furthermore, non-OECD countries that depend on EU scrap for secondary production—such as India, Pakistan, and Egypt—would face acute shortages, forcing them to mine new ore and burn more fossil fuels. Thus, the WSR risks exporting emissions even as it seeks to prevent them.

The Invisible Hand of Informality

When regulation outpaces global coordination, informality fills the vacuum. The United Nations University’s 2023 E-waste Report estimates that informal recyclers now handle over 60% of global non-ferrous scrap. Many operate without environmental oversight but maintain critical supply chains for developing economies. In Ghana’s Agbogbloshie district, for instance, 150,000 workers depend on informal recycling for livelihood—yet the process releases thousands of tons of lead and cadmium annually. The EU’s export restrictions may further drive these operations by cutting formal supply routes, compelling importers to source from shadow economies.

Rethinking Circular Sovereignty

The circular economy is not about hoarding resources; it is about reimagining value chains beyond borders. Countries that succeed in true circularity—such as Sweden, South Korea, and the Netherlands—have done so by integrating open trade with environmental standards. Sweden allows controlled scrap exports but links each shipment to life-cycle emissions reporting, achieving 94% recycling efficiency without banning exports. South Korea uses bilateral recycling partnerships with Southeast Asia, offering technology transfers in exchange for traceability. Such models illustrate that circular sovereignty is achieved not through isolation, but through shared accountability.

The world is entering an era where industrial policy is increasingly climate policy. Yet when nations equate “green autonomy” with “material isolation,” the result is a circular paradox that undermines both. The future of sustainability will depend less on how much material each country retains, and more on how transparently the world circulates it.

Works Cited

“Global Scrap Trade Statistics 2023.” World Bank Open Data, 2024. https://data.worldbank.org/indicator/trade-scrap-2023

“Resource Efficiency and Waste Flows Report.” OECD Environmental Directorate, 2023. https://www.oecd.org/environment/resource-efficiency-report-2023

“Circular Economy Action Plan.” European Commission Environment Directorate-General, 2024. https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en

“Ferrous Scrap Price Index.” World Steel Association, 2023. https://worldsteel.org/data-forecasts/prices

“Material Efficiency in Secondary Metal Markets.” University College London – Material Efficiency Lab, 2023. https://www.ucl.ac.uk/material-efficiency

“Global E-Waste Monitor 2023.” United Nations University, 2023. https://ewastemonitor.info/

“Recycling Industry Position Paper on the Waste Shipment Regulation Revision.” European Recycling Industries’ Confederation (EuRIC), 2024. https://euric.org/publications/wsr-policy-brief

“International Energy Agency Steel Emissions Report 2022.” IEA Publications, 2022. https://www.iea.org/reports/steel-sector-emissions-2022

“Basel Action Network: Waste Trade Tracker.” BAN.org, 2023. https://www.ban.org/tracker

BloombergNEF. “Copper and Aluminum Recycling Outlook 2024–2026.” BloombergNEF, 2024. https://about.bnef.com/reports/recycling-outlook-2026