India Topples China as Biggest Aluminium Scrap Importer

The worst fears of domestic aluminium producers on scrap imports are ringing true. India has supplanted China as the world's largest importer of aluminium scrap during Q1 or January-March period of calendar 2019, a study by Platts showed.

Going by findings of the report, India imported 334,725 tonnes of aluminium scrap, edging past China's 330,567 tonnes in the same period. It may be noted that China's aluminium scrap imports tanked 32 per cent between January-March of 2019 whereas India's rose by 18.8 per cent year-on-year (y-o-y).

Imports have been a pain in the neck for primary aluminium producers. In FY19, India's overall aluminium imports escalated 19 per cent whilst scrap alone went up by 19 per cent.

India's scrap aluminium imports have been on an upward trajectory because of rising demand for secondary aluminium alloy used in automobile and housing parts. On the contrary, China's inbound scrap shipments have been on a downtrend after the government there has enforced curbs to contain rising emissions.

It makes sense for the secondary producers to import aluminium scrap since scrap remelting uses less than 10 per cent of the energy expended typically on an aluminium smelter. Since the secondary aluminium makers were operating on tiny margins, they lacked the capital to expand their capacities. The secondary makers aver that scrap imports is a global phenomenon with top producers like China importing it in significant volumes.

But the primary producers quibble about the unabated growth in scrap imports. According to them, scrap imports moved ahead since the duty was kept at only 2.5 per cent. Ahead of the Budget for 2019-20, the Aluminium Association of India (AAI), the voice of big players like Hindalco, Vedanta and Nalco, have called for a four-fold hike in duty on scraps to 10 per cent. They feel India can be the worst casualty of the festering trade war between US and China. The wrangle over duties started with US imposing 10 per cent levy on imports of steel and aluminium. China retaliated by levying 25 per cent tax on scrap imports from US.

With the European Union (EU) enforcing stern curbs on scrap imports, India has turned out to be the favoured hunting ground for scraps. China's stricter norms on metal scrap and waste imports have also magnified fears of the primary aluminium producers. By 2020, China is looking at zero scrap imports. It will also initiate, in July 2019, stricter curbs by placing aluminium scrap in the Restrictive Imports list.