India's scrap consumption up 8% in Jan-Oct'24 as green steel initiatives gain ground

• Share of IF-EAF mills rises versus BF route
  
  
• Domestic scrap consumption pulls up volume
  
  
• Imported material becoming scarce & costlier
  
  

Morning Brief: India's ferrous scrap consumption rose around 8% in the first 10 months of 2024 (10MCY'24) to over 28 million tonnes (mnt) against 26 mnt seen in the corresponding period last year (CPLY).

This growth marks a shift to greener, more efficient, and cost-effective steelmaking practices, keeping in mind future emission goals.

The overall increase in this period under review was propelled by a rise in domestic scrap consumption which rose a healthy 22% in 10MCY'24 to 21 mnt against 17 mnt seen in CPLY. The share of imported scrap dropped 19% to around 7 mnt (9 mnt).

Factors that pulled up India's ferrous scrap consumption in 10MCY'24

Increase in crude steel production: India's steel production has risen in parallel with scrap demand. According to World Steel Association (WSA) data, India's steel production in 10MCY'24 touched 122.68 mnt, a 6% y-o-y increase, further driving the need for scrap in steel-making. The country's crude steel output in 2023 also saw a robust 12% increase, propelling the growing demand for scrap.

Growing reliance on IF-EAF methods: India is seeing a growing reliance on induction furnace (IF) and electric arc furnace (EF) routes of steel-making. Corroborating this point is the fact that scrap usage by EAFs and IFs rose 11% y-o-y to 23 mnt in the period under review whereas the share of the blast furnace route fell by 3% to 5.36 mnt. Electric furnace methods are gaining popularity because of their ability to produce steel at lower costs. Plus, these also leave a lighter carbon footprint, aligning with India's sustainability goals.

It may be noted, imported scrap consumption experienced a sharp decline of 19%, again reflecting a worldwide shift towards the electric method as supplier countries move towards their respective sustainability goals.

Higher domestic scrap availability improves consumption: Domestic scrap availability has significantly improved in recent years. Several initiatives are driving this trend. These include: India's End-of-Life Vehicle (ELV) policy remains in its early stages of implementation but holds significant potential. Despite challenges such as low infrastructure utilisation and competition from the unorganised sector, ELV is expected to generate around 6 mnt of steel scrap annually by 2025, driven by further investments in recycling infrastructure and increased public awareness.

These policies are not only increasing local scrap generation but also giving an organised character to the market, enhancing availability, and supporting the shift toward a circular economy.

Higher availability is increasing domestic scrap consumption. For instance, India's domestic scrap consumption has risen to around 21 mnt in January-October 2024 from around 19 mnt in the same period in 2021.

Price viability encourages domestic scrap procurement: Higher domestic availability is also pressuring down prices, offering greater cost viability for mills especially since imported scrap is increasingly becoming scarce and expensive. BigMint data reveals, the domestic price of HMS 80:20, DAP Jalna, was cheaper by INR 1,651/t ($20/t) at INR 33,736/t ($400/t) over January-October, 2024 against the INR 35,387/t ($419/t) seen for the imported variety in this period.

Outlook

Looking ahead, India's dependence on imported scrap is expected to decrease dramatically in FY'25. Imports are projected to fall by over 30% due to greater domestic scrap availability and increased use of alternative feedstocks like hot metal and sponge iron. The continued growth in domestic scrap generation from sources already mentioned above and infrastructure expansion will further reduce reliance on imports, ensuring long-term sustainability and cost-efficiency for steelmakers.

Thus, India's scrap market is entering a transformative phase, supported by policy interventions and sustainability initiatives. Hence, the country's scrap consumption is poised for long-term growth, strengthening the steel circular economy while reducing its environmental footprint.