A billet is a bar made from crude steel which surface contains scales which are rich in iron oxides. This study presents the carbothermal reduction of the scales formed in steel billets. The process included the reaction of the iron oxides contents with carbon (in ratio 5:1) and annealing in a tubular furnace under argon atmosphere. The occurred reactions are discussed using thermodynamic calculations and thermal analysis which indicate a three-stage reduction process Fe3O4 ➔ FeO ➔ Fe3C ➔α-Fe with intermediate reactions at the interval temperature 960 and 1300 °C. The X-ray diffraction confirms the reduction to α-Fe with minor presence of unreacted C, magnetite and wustite. Mössbauer spectroscopy analysis was performed at room temperature where a typical sextet corresponding to the dominant α-Fe is shown as well as wustite, magnetite and cementite to a lesser extent. The magnetization measurements confirm the ferromagnetic state corresponding to the α-Fe.