Raw materials account for 55–65% of steel production cost per tonne, making iron-unit yield, scrap recovery, and input purchasing the largest cost-reduction levers [S1].
Effective mills measure metallic yield, slag volume, process losses, and internal material recovery by campaign and by product grade, then convert each loss into a cost per shipped tonne [S1][S2].
Raw Material Cost Starts With the Furnace Route
Integrated blast furnace and basic oxygen furnace mills mainly buy iron ore, coke, and other reductants, while electric arc furnace mills mainly buy ferrous scrap, with iron substitutes used where commercially and metallurgically practical [S5].
Published cost benchmarks put raw materials at $385–$520 per tonne for integrated BF-BOF production and $210–$310 per tonne for EAF production, before accounting for yield losses and downstream processing [S1]. These are operating ranges rather than universal quotations: plant configuration, product mix, energy markets, and scrap quality can move the result substantially [S1].
The comparison should therefore use delivered metal cost, not purchase price alone. A cheaper scrap load with poor chemical cleanliness, excess tramp elements, or low usable yield can cost more after dilution, slag formation, rework, and rejected product [S5][S10].
Yield Improvement Produces the Fastest Material Saving
A 2% improvement in iron-unit or scrap yield has a larger absolute effect on cost per tonne than a 10% reduction in a smaller cost category [S1]. The operational objective is to separate true metallic yield from total charge mass, then identify where non-product material leaves the material balance.
The principal loss streams are slag, dust, sludge, scale, refractory waste, off-gas residues, and unrecovered internal scrap [S3]. Scale from continuous casting and rolling can return to the sinter plant; scrap can return to the melting shop; and blast-furnace dust can also be recycled to sinter production [S3].
Waste recovery changes the economic classification of a residue only when the recovered stream has a defined destination, chemistry, transport cost, and value or metallurgical benefit. Coke dust and coal dust can enter the sinter charge, while tar sludge can be returned to the coal blend to improve blend density [S3]. Slag can be processed for sale to cement manufacturers, and refractory waste can be returned to refractory producers for reprocessing [S3].
BF-BOF and EAF Mills Have Different Cost Levers
BF-BOF plants control ore, coke, burden quality, slag volume, and hot-metal yield, whereas EAF plants control scrap sorting, charge composition, melting yield, slag chemistry, and the availability of iron units [S5].
Liquid pig iron can create productivity and energy savings at a steel mill because it arrives molten, but its delivered cost must be compared with the scrap, energy, slag, and yield costs it replaces [S5]. For EAF operators, buying units without iron can increase slag and electricity demand, so scrap price alone is an incomplete purchasing metric [S10].
This route comparison does not support choosing BF-BOF or EAF from raw material cost alone. Product specification, grade mix, scrap availability, electricity intensity, local ore economics, and downstream steelmaking requirements can reverse the apparent price advantage [S5][S10].
Procurement Must Be Priced by Usable Unit
Steel procurement teams can lower raw material cost per tonne by contracting on useful metal content, delivered location, and processing yield rather than invoice price per shipped tonne. For ore and coke, the relevant comparison includes delivered cost, recoverable iron or carbon content, and the burden's response to chemistry. For scrap, it includes usable metal mass, contamination, density, and expected melt loss [S1][S9].
Regional differences in raw material and fuel costs make alternative production routes competitive in different markets, so a mine-side price or mill scrap index is not enough for a plant decision [S7]. Plant-level delivered cost should include freight, handling, taxes, moisture or tare adjustments, and the working-capital cost of carrying inventory [S7].
Volume tier affects negotiation, but a large contract can still be uneconomic if the material lowers yield. The correct purchasing comparison is usable feed cost per tonne of saleable steel. For an EAF, cash costs can be 70–75% scrap, while total cash costs range from $380 to $650 per tonne depending on raw material prices and regional labor rates [S9].
Maintenance and Process Control Protect the Material Saving
Maintenance represents 10–15% of steel production cost, and maintenance-related inefficiency can add an estimated $80–$150 per tonne through downtime, quality losses, excess energy use, and emergency procurement [S2]. A plant cannot retain a lower feed cost if worn equipment raises slag, creates defects, or interrupts heats.
At a mill producing 5,000–$10,000 tonnes per day, one hour of unplanned downtime removes 200–400 tonnes of output [S2]. The financial effect appears as lost throughput and unabsorbed fixed cost rather than as a higher ore invoice. If fixed cost is $120 per tonne and 2,000 tonnes are lost in a month, unabsorbed overhead reaches $240,000 for that month [S2].
Equipment condition can also destroy material value. When degraded equipment causes 3–5% of output to be downgraded and the price reduction is $50–$100 per tonne, the effective penalty is $1.50–$5.00 per tonne shipped [S2]. Preventive control of rolls, furnace equipment, heat exchangers, bearings, compressed-air systems, and material-handling gear should therefore be judged on avoided yield loss, not only repair expenditure [S2].
Low-Carbon Inputs Can Raise the Cost Base
Raw materials and energy inputs represent an estimated 60–80% of steel plant production costs, so switching to higher-cost low-emission feedstocks can move raw material economics before plant efficiency gains compensate [S4].
Non-coal steelmaking can require higher-grade iron ore to limit EAF slag, which may require additional beneficiation, reduce yield, and raise cost [S4]. Higher-grade ore is therefore not automatically the lowest-cost ore once processing losses and the value of avoided slag are included.
Capital cost also sets the hurdle. A new low-emissions plant is estimated at $600–$800 million per annual million-tonne capacity, while a full retrofit of an existing BF-BOF plant with equivalent capacity is estimated at roughly one-third of that amount [S4]. For procurement decisions, the relevant comparison includes the new energy or feedstock price, expected yield, operating labor, maintenance, and avoided carbon-compliance costs, not only the nominal commodity price.
Total Cost of Ownership Determines the Real Saving
The cheapest input is not the input with the lowest invoice. Installation and handling cost rises with bulky, low-density, contaminated, or difficult-to-store scrap, while every transport leg and blending step can add handling loss. Energy cost rises when charge composition creates excess slag or inefficient melting, and maintenance cost rises when dirty material accelerates wear or blocks handling systems [S2][S9].
Waste recovery can lower net material cost only after accounting for segregation, screening, reprocessing, storage, transport, and product-market constraints. Returning scale to sinter, recycling scrap to the melt shop, and processing slag for cement use reduce disposal and purchasing requirements, but each route has its own logistics and processing cost [S3].
CBAM exposure can also alter the value of an operating improvement, so mills comparing metallic yield, energy intensity, and carbon data should assess the cost consequences under the applicable regime described in CBAM steel and aluminium cost impact: 2026 regime and 2030 numbers.
For the next cost review, track four figures by furnace campaign and finished grade: purchased input cost per tonne, metallic yield, slag and dust mass per tonne, and unplanned downtime minutes. A raw material saving is bankable only when usable output, quality, energy use, and maintenance cost do not erase it.