How can India unlock its scrap generation potential by FY30?
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- India needs to take more initiatives to generate additional scrap
- Imported scrap quality to deteriorate in future
- India's scrap scarcity to be filled in by DRI
Morning Brief: Scrap consumption in global steelmaking is set to grow 35-40% by 2030, underscoring the expanded role this raw material is set to play in the near future. Concomitantly, India should undertake more initiatives to generate additional scrap which will help its steel industry to lower its emissions amid the emerging decarbonisation drive, said experts who were part of the panel on "Recycling Gaining Pace in India" at SteelMint's recently concluded flagship conference in Kolkata.
The experts on the panel included Sachin Shetty, Managing Partner, Quesrow; Nitin Kabra, Director, Bhagyalaxmi Rolling Mill Pvt Ltd; Dinesh Adukia, Managing Director, Adukia Industries; Vivek Prasad, Head of Sales & Marketing- Steel Recycling Business, Tata Steel: Arunava Mandal, General Manager, eSourcing Services, Mjunction Services Ltd, and Kundan Rai, Section Head, Recycling Strategy, ArcelorMittal Nippon Steel India.
Key takeaways from the session
The India story-
- India produces about 22 million tonnes (mnt) of scrap but has a potential to generate around 30 mnt. So, the present opportunity loss is around 8 mnt. In this 22 mnt, IFs-EAFs consume around 58%, iron and steel foundries, 32%, and BF-BoF units, the balance 22%.
- Interestingly, the BF-BoF consumption in the last five years, has gone up at a CAGR of 16% whereas it has grown only 7% across IFs-EAFs, lower than the industry average of 9%.
- Equally interesting is that it is not end-of-life (EOL) scrap that is driving the generation volumes but the new and processing scrap that is contributing the major portion (60%). EOL brings in the remaining 40%.
- In FY23, India consumed around 32 mnt of scrap for making steel, which led to around 26% of scrap charge.
- What will happen in FY30? In this 32 mnt, 9 mnt were imported with 3-4 mnt from the US. The country was able to supply more because Turkiye consumed less. Around 2-3 years down the line, protectionist measures will be initiated. Because scrap is one of the first materials that will decarbonise steel. Hydrogen and CCUS are still in testing mode with question marks on their scalability.
- By FY30, there will be 45 mnt demand for scrap. India will generate 38 mnt. There will be a net scarcity of 8-9 mnt, which will be fulfilled by:
A) Imports but their quality may deteriorate as protectionism sets in.
B) If the vehicle scrappage policy plays out well which can generate 5-6 mnt.
- In the next 5-6 years, there will likely be a certain decline in scrap generation vis-a-vis demand. There will not be a drop in the absolute numbers. But the percentage of scrap in steelmaking will see a drop. After that, there will possibly be a huge increase in India's scrap generation. And the answer lies here: Interestingly, post-2000, India started consuming certain products, especially consumer goods, at a very high growth rate. These will start converting to scrap post-2030.
- GCC is seeing huge installations of gas-based DRI units. A lot of gas-based DRI is seen flowing into the west coast of India in the next 4-5 years. So the need gap in scrap will be filled by DRI as well. With the shortage of scrap, India's dependence on imports will continue.
- India's imports of ferrous scrap for steelmaking stood at around 9.8 mnt in financial year FY23- a sharp rise compared to around 3.6 mnt in FY22. This reflects a three-fold rise in ferrous scrap imports by India in the recently-concluded fiscal on the back of higher domestic crude steel production, lower availability of domestic scrap, as well as geopolitical upheavals that altered global trade flows and resulted in higher scrap shipments being directed towards India.
- The Indian government should strictly implement its vehicle scrappage policy. "Because, we often see that vehicles as old as more than 15 years still continue to ply on Indian roads," observed one panelist.
- The government must ensure that vehicles driven in India undergo fitness tests after 15 years. If these vehicles fail the fitness test, then these should be scrapped without delay. In this way, India can generate a lot of scrap by dismantling unfit vehicles. Moreover, this process will lead to less pollution, improved air quality, and increased job opportunities in the country's scrapping centres.
- Most importantly, stricter implementation of the Vehicle Scrappage Policy will lead to the growth and reorganisation of the recycling market.
- Ferrous scrap in large volumes is going to be generated due to the upgradation/renovation/demolition of old structures, buildings, etc.
- Auto recycling policy and ferrous scrap recycling policy are going to be the key enablers.
- It is also expected that the global ratio of blast furnace (BF)-basic oxygen furnace (BoF): electric arc furnace (EAF) ratio, which currently stands at 70:30, will gradually change to 60:40 by 2030 as sustainability concerns become more pressing.
- The average scrap charge in low phosphorus (LP) steel is at 42% of the metallics mix which is expected to grow to 50% by FY30.
The global perspective
- Worldsteel (WSA) has projected that end-of-life scrap generation in China is likely to rise exponentially to 350 mnt by 2030.
- China accounts for around 55% of global steel production. Consumption of ferrous scrap in China was the highest at 225 mnt in 2020. However, the BF-BoF route still accounts for over 85% of its steelmaking.
- The US is the largest ferrous scrap supplier and Turkiye the largest importer, accounting for 31% of the total volumes of 67 mnt in 2022, as per Quesrow's research.
Outlook
The availability of scrap is a major issue in India. The gap between demand and supply is likely to be reduced in the future. However, the country needs a series of Herculean efforts to be self-sufficient in this sphere by 2030. Experts opined that the efficient use of scrap for steel production becomes paramount for India as 35-40% share has been envisaged from scrap-based steel production in the journey of 300 mnt per annum by 2030. This shall increase the requirement of steel scrap from the present level of around 25 mnt to more than 50 mnt by 2030. This is mainly because, with the increase in consumption of steel in the recent past and end-of-life vehicles (ELVs), the generation of scrap is likely to be increased considerably. This scrap has to be channelised so that the same can be utilised for steel production in an environmental-friendly manner. Here lies the real challenge for the Indian steel industry. Otherwise, India will continue to depend on scrap imports, experts emphasised.