India's scrap feed in steel making drops by 3% in Apr-Nov'22 - SteelMint Research

India's total scrap consumption in the first eight months of financial year 2022-23 (FY23) amounted to 17.31 million tonnes (mnt), reveals SteelMint data. This was almost stable compared to 17.36 mnt consumed in FY22.

But, more importantly, the data reveals that the ratio of other metallics like pig iron and DRI went up to 72% versus 28% scrap in the charge mix in April-November, FY23. In comparison, the share of other metallics was at 69%, and scrap at 31% in the same period last fiscal, denoting a 3% drop for the latter.

The data also revealed that in this 17.31 mnt ferrous scrap consumed in India over January-November, the share of domestic material amounted to 11.94 mnt against 15.26 mnt in the same period in the previous fiscal, down 22% y-o-y.Why did domestic scrap consumption drop?

GST drive leads to tight domestic scrap availability: Scrap generation within India became scarce this year which led to lesser consumption of the same and made buyers more dependent on imported scrap. The government, in a bid to increase accountability and increase its revenue collection, began a drive to bring unofficial transactions within the GST ambit. As a result, the local, unorganised scrap generation segment went into a tizzy and stopped transactions in many regions, especially northern India. This led to a sharp drop in local scrap generation and collection.

The GST drive also led to squeezed liquidity in the market, which impacted the local trade too.

Rise in imported scrap consumption

On the other hand, availability of cheap imported scrap increased during this period under review. Traditional ferrous scrap buyers like Turkey, South Asia and Southeast Asia eschewed procurement and sellers, saddled with inventory, sold cheap to Indian buyers. As a result, India's imported scrap consumption over April-November, 2022 more than doubled to 5.37 mnt against 2.10 mnt in the same eight months in 2022. In fact, India became the second-highest ferrous scrap importer over April-November, 2022, after Turkey.

Crude steel output up

It may be noted that India's crude steel production from April-November, 2023 was at 81.76 mnt against 77.12 mnt seen in the same period in FY22, up 6% y-o-y.

Ideally, with the rise in crude steel production, the consumption of ferrous scrap should also have gone up y-o-y. Instead, SteelMint notes that consumption of other metallics (pig iron and DRI) by electric arc furnaces (EAFs) and induction furnaces (IFs) has risen in tandem with the inching up of crude steel production.

In April-November, 2023, crude steel production through the EAF-IF route was 44.15 mnt against 42.91 mnt in the same period in FY22, up almost 3% y-o-y. It is widely known that both scrap and metallics are used in the EAF-IF route of steel-making.

Outlook

Looking at the long term and the government's stress on decarbonization, many recycling facilities are in the process of being set up which will increase domestic scrap generation in the long term, supported by the government's vehicle scrappage policy.

The government aims to reduce carbon emissions by 20% by 2030, 50% by 2047 and 100% by 2070. Working towards this end, it aims to increase the share of scrap to 20% by 2022, 30% by 2030, 45% by 2040 and 60% by 2047.