Proposed mannequin exhibits potential for round practices in building metal

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Contrary to popular belief, a profitable business model for recycled structural steel is nowhere near as impossible as one might think.

Steel manufacturers have near perfected the “recycling” element of the four hierarchical elements of the circular economy – reduction, reuse, remanufacturing and recycling – with a steel recycling rate of almost 90 percent.

Despite the success of recycling, the steel industry is under increasing pressure to decarbonize. Steel recycling is still both energy and cost intensive, and both steelmakers and their customers need to go further to reduce their environmental impact. One way to do this is to switch to a reuse model.

At the same time, the built environment is working to reduce the carbon content of buildings – emissions from the manufacture of building materials – which make up about 11 percent of total global emissions. As steel is a major contributor to carbon in buildings, one approach – reusing steel from older buildings in new construction projects – has attracted attention, but the supply of reused structural steel remains limited.

The practice of reusing steel is not new. For example, the industry has reused railroad tracks and automotive components for decades, but reusing structural steel is a unique challenge. Steel industry experts believe the barriers to a profitable re-used structural steel model are insurmountable. Even if it doesn’t, who are the key players in this new circular supply chain?

Is there even a role for a primary steel producer? How will steel manufacturers adjust their supply chains, store warehouses and validate steel quality? Can this new business model involving steelmakers create shareholder value without affecting new steel sales?

Our team of four PhD students at the Yale School of the Environment addressed these questions as part of a consultancy course and developed a potential business model for our “customer” ArcelorMittal, one of the world’s largest steel producers. The model known as the Steel Buyback Bundle Program, which we developed on his behalf, would enable steelmakers to sell recycled structural steel at a profit.

Circular business model

Our proposed business model consists of the following five steps: partnership with demolition companies; buy back the steel; inspect the steel; bundling recycled steel with new steel; and keep track of all steel specifications.

In step 1, the steel manufacturer develops relationships with demolition companies in locations where they operate. These partnerships are designed to encourage contractors to deconstruct rather than demolish, and contractors are designed to alert the steelmaker that a building is about to collapse.

In step 2, the demolition contractor deconstructs a building, which is stimulated by the premium price that the steel manufacturer offers for reusable steel compared to steel scrap. The demolition contractor transports the steel to the next mill. The steelmaker pays a premium for structural steel which, based on a visual inspection, appears reusable and offers a market price for the remaining steel scrap.

In step 3, the steelmaker validates 100 percent of the recovered steel according to the applicable standards using the technology already in place in the mills. Steel that does not meet the standards is recycled as scrap, which minimizes financial losses.

In step 4, the steel manufacturer bundles new and reused steel in current orders, eliminating the holding costs. The proportion of reused steel in the bundle is based on its supply and the steelmaker’s goal of minimizing holding costs.

In step 5, the steelmaker’s customers enter steel bundle specifications into an inventory database for traceability to encourage future reuse.

We believe that broad adoption of this proposed model would enable the transition from partnerships with demolition companies to a steel inventory database.

The database would track buildings up or down and maintain specifications of the steel in buildings. Maintaining steel specifications in a database would eliminate the need for partnerships with demolition companies and minimize inspection and costs for steel manufacturers.

As part of our exercise, we demonstrated the profitability of the model using data on steel profiles from ArcelorMittal. We have focused on the UK, where embodied carbon and the reuse of building materials are at the forefront of the discussions. Based on the company’s numbers, we have estimated a profit of approximately $ 565 per ton for recycled steel, seven times the profit per ton for new steel sections.

“Thinking outside the box worked with a very simple solution,” said Alan Knight, director of corporate sustainability and sustainable development at ArcelorMittal and consultant for our project. “Many in the structural steel sector have grappled with the question of how to make reusing steel viable. The simple step of combining the reused with the new is a significant step forward. It shows how a fresh look often makes decisions that others in the industry sometimes fail to see. “

The Steel Buyback Bundle program we proposed for ArcelorMittal successfully reduces the logistical challenges associated with the procurement, transportation, storage and inspection of recycled steel. This no regret business model could help steelmakers promote circular economy practices in the steel industry, reduce emissions and ensure future supplies of reused steel.

Given the changing regulatory landscape related to the reuse of building materials (such as European regulation EN 15804, The London Plan Policy SI7), it is imperative that steelmakers prioritize decarbonization and implement reuse strategies such as this proposed model.

Over time, industry-wide adoption of models like the one we propose could strengthen financial and operational feasibility and make recycled structural steel the industry norm.