India's ferrous scrap consumption to rise in FY'22, imports drop

India's overall ferrous scrap consumption in financial year 2021-22 (FY'22) is expected to touch almost 24 million tonnes (mnt), rising 33% y-o-y, as per data compiled by SteelMint. In FY21, the same was at around 18 mnt. In this 24 mnt, the share of imported scrap is expected to be at 3.50 mnt, a drop of 17% from 4.20 mnt seen in FY'21. Domestic scrap consumption in the current fiscal is expected to touch 20 mnt from 14 mnt in FY'21.

For the first nine months (9MFY'22) of the current fiscal, ie, Apr-Dec'21, India's total ferrous scrap consumption has touched almost 15.5 mnt, compared to 10 mnt in 9M FY'21, up 50% y-o-y. The share of domestic scrap in 9MFY'22 is around 13.4 mnt against 7.7 mnt in 9MFY'21 and imported is at 2.1 mnt (2.6 mnt in FY'21).

Overall, India has been consuming 20-22 mnt of ferrous scrap in steel making since the last few years. Added to this is another 5-6 mnt of cast iron (CI) scrap which is used in the foundry industry.

Factors supporting rise in scrap consumption

• Scrap share to rise in secondary mills: The "metallic mix" data maintained with SteelMint reveals that the estimated ferrous scrap share in EAFs and IFs will increase to 27% in FY'22 from 22% seen in FY'21, showing an increase of 5% y-o-y.

  In FY'21, the usage of scrap by EAF and IFs was lesser due to the non-availability of scrap in India because of the severe Covid lockdowns in 2020, as a result of which many of the scrap auctions did not take place in FY'21. The jump of 5% y-o-y can be attributed to higher domestic scrap availability in the current fiscal. Availability has risen because more scraping centres have come up.
  
  

• In FY'22, domestic ferrous scrap HMS 1&2 (80:20) prices have been high, averaging INR 35,000/tonne DAP Mumbai against INR 25,000/t in the previous fiscal year. Prices increased in FY'22 but still scrap usage rose 5% because, overall, crude steel production is slated to rise 15%. In such a context, scrap usage is actually less and has scope to rise, feel industry sources."India's ferrous scrap consumption will possibly end the year at a higher volume y-o-y because of greater availability of domestic scrap in the current fiscal which also allowed imports to remain lower y-o-y," said an industry source.
  
  

Outlook

SteelMint expects India's ferrous scrap consumption to improve further in FY'23, by at least 5-10%.

The reasons are two-fold:

First, next fiscal, scrap imports will rise from current levels of 3.5 mnt to above 4.5 mnt if prices are supportive. This is because, importantly, the present volume of domestic scrap may not be available next fiscal. FY'22 saw some overhang/pent-up generation from the previous year which boosted supply. Domestic generation is usually in the 15-18 mnt range.

Secondly, mills are becoming carbon-conscious even in India and looking to increase the scrap charge in blast furnaces. Scrap consumption by the BF route of steel-making has hovered at 5-6 mnt, with the EAF-IF share at over 18 mnt. There is thus scope for rise in this share at BFs.