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Analysis: India's new steel scrap policy raises concerns on higher unprocessed imports

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Analysis: India's new steel scrap policy raises concerns on higher unprocessed imports

Singapore — India's new scrap policy has raised several market concerns ranging from a surge of mixed metal (unprocessed) scrap flowing into the country to challenges of setting up recycling centers, market participants said.

India's Ministry of Steel on November 6 unveiled its steel scrap recycling policy after seeking industry feedback on a draft of the policy in July.

The policy resulted from the Indian government's National Steel Policy of 2017, in which the country is expected to have 300 million mt/year of steel production capacity by 2030. About 35%-40% of the overall 2030 production is expected to come from electric arc and induction furnaces.

"The scrapping policy shall ensure that quality scrap is available for the steel industry. Scrap is an important input for the electric furnaces," the ministry said.

POTENTIAL SURGE IN MIXED METAL IMPORTS The policy could result in a surge of mixed metal (unprocessed) scrap into India, several market participants told S&P Global Platts.

This comes at a time when countries worldwide are seeking an outlet for waste metals after China's tightening of mixed metal imports.

With India having better capabilities to process scrap at a competitive cost, market participants said that imports would likely change in terms of the type of scrap rather than the volume.

"It's not a matter of increasing or decreasing imports, it's a matter of saving costs. Indian buyers would likely import more unprocessed scrap, which is $20-$30 below the processed scrap prices," a UK-based supplier said. "It is much more cost competitive to process it in India than in the US and Europe."

The scrapping facilities that the policy aims to build could increase India's capacity to process mixed metal scrap and lead to greater flows of mixed metal imports into the country, according to market participants. However, some added that future government intervention might prevent an influx of such material.

The policy projected that India will need to set up about 70 scrap processing centers in the country to meet a current deficit of about 7 million mt.

Each center will have a processing capacity of about 100,000 mt/year, which will require about 300 collection and dismantling centers "on the presumption the four collecting and dismantling centers cater to [each] scrap processing center," the ministry said.

When India's steel production capacity reaches 250 million mt/year, its scrap requirements will reach 70 million-80 million mt/year, it said. Currently, India's scrap requirements hover at 30 million mt/year.

"This shall require about 700 scrap processing centers, that is 700 shredders. These shall in turn be fed by 2,800-3,000 collections and dismantling centers spread all over the country," the ministry said.

"It's definitely possible that India becomes a key destination for unprocessed scrap, however the facilities will only be coming soonest in two to three years after the policy is implemented," a major Indian mill source said. "A lot can happen in that time, the government may impose restrictions before that, if inflow gets too high."

Following China's toughened stance on waste material imports into the country since 2017, countries like Japan were finding alternative avenues for its mixed metal scrap, which included places like Vietnam, Malaysia, and recently India, Platts reported previously.

"After China, Japan was sending mixed metal scrap to Malaysia and Vietnam. But the governments there are making it difficult now too. But India seems to be another avenue now," a Japanese trader told Platts.

NEED FOR VEHICLE RECYCLING POLICY

In the meantime, the Material Recycling Association of India said that achieving scrap self-sufficiency, a key goal of the policy, would be challenging because scrap demand will continue to be significantly higher than supply in India as there is a need to fulfill the country's target of 300 million mt/year steel production by 2030.

Other market participants also held the view that in order for India to reduce its scrap deficit, other policies have to be implemented complementary to the current policy. One potential policy highlighted was over India's End of Life Vehicle, or ELV, recycling procedures -- still under planning stage -- which have been strongly advocated by many in the nation's automotive sector.

"A solid ELV recycling policy would create a more consistent supply of steel scrap within India and solve its environmental issues as well," an Indian mill source said. "However to be self-sufficient would take time and may be hard to achieve within the next decade."

The steel ministry said it will work with the Ministry of Skill Development and Entrepreneurship to develop "new vocational courses ... for equipping people in recycling of ELVs, white goods and other scraps in an environmentally sound and safe manner..."

Also, the steel ministry said it will "consider special status for eco parks that are to be set up for recycling and scrapping purposes and consider introducing targeted recycling-based tax incentives, both direct and indirect tax."

-- Clement Choo, clement.choo@spglobal.com

-- Samuel Chin, samuel.chin@spglobal.com

-- Marcus Ong, marcus.ong@spglobal.com

-- Edited by Kshitiz Goliya, kshitizgoliya@spglobal.com