India's ferrous scrap imports rise threefold in FY23

• Total shipments edge up by 180% y-o-y in just-concluded fiscal
  
  
• India emerges as major global scrap buyer after Turkiye
  
  
• Scrap consumption in steelmaking to increase to more than 50 mnt by FY30
  
  

India's imports of ferrous scrap for steelmaking stood at around 9.8 million tonnes (mnt) in FY23 - a sharp rise compared with around 3.6 mnt in FY22, provisional data available with SteelMint reveal. 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.

Out of total imports, around 2.3 mnt were bulk shipments, while the rest were containerized scrap imports. India's ferrous scrap consumption in steelmaking in FY23 is likely to have been 28-30 mnt. SteelMint data shows that ~24 mnt of scrap was consumed in FY22 vis-a-vis 18 mnt in FY21.

Overall, India has been consuming 22-24 mnt of scrap in steel making over the last few years and another 5-6 mnt of cast iron scrap in the foundry industry.

Why imports surged?

• Crude steel output rises: India's crude steel production is expected to have exceeded 130 mnt in FY23 against 120 mnt in the previous fiscal. Domestic steel consumption increased by nearly 12% y-o-y in 2022, as per JPC data. India was the only bright spot in the global economy, with steel production increasing by 6% y-o-y in 2022. Therefore, imported scrap consumption naturally increased in the absence of sufficient domestic generation.
  
  
• Lack of domestic availability: Domestic scrap generation has come under pressure due to the government's efforts to increase accountability and increase revenue collection. This has set in motion a drive to bring unofficial transactions within the GST ambit. Dealers in the unorganised scrap segment have stopped transactions in many regions, particularly north India. This has resulted in a sharp drop in domestic scrap generation and collection, thereby increasing dependency on imports.
  
  

• Rise in bulk imports: As per Worldsteel data, crude steel production in Turkiye, the world's top seaborne scrap consumer, fell by 13% y-o-y in 2022 to 35 mnt. Cheap semi-finished steel imports into Turkiye from the CIS following the outbreak of the Russia-Ukraine war and the sharp surge in global energy prices impacted the capacity utilisation of steel mills in Turkiye. Therefore, the absence of Turkiye from the bulk market resulted in more cargoes arriving in India. Similarly, the currency crisis amid mild global recession and energy inflation impacted scrap buying of major South East Asian buyers such as Bangladesh and Pakistan. So, global suppliers re-directed almost all cargoes to India.
  
  
• Price factor: A drop in demand for ferrous scrap in the global market resulted in a price correction, with foreign scrap cargo becoming cheaper than local scrap until January. This situation prompted mills to use more imported scrap.
  
  

Outlook

The need to adhere by general sustainability, circularity and decarbonisation initiatives will boost the consumption of scrap in steelmaking. As per SteelMint estimates, India is likely to consume around 55 mnt of scrap in steel production by FY30 and although domestic scrap generation is increasing because of higher construction and engineering activities, and is likely to touch about 35-40 mnt in the next seven to eight years, it will not be sufficient. The country will have to import more.

Going forward, domestic prices of other metallics such as sponge iron, global trade dynamics and prices for ferrous scrap and issues such as logistical challenges and container availability will determine India's imports of ferrous scrap.