India’s ferrous scrap consumption increases in FY22, imports drop

India’s overall ferrous scrap consumption in the last financial year 2021-22 (FY22) stood at 24.34 million tonnes (mnt), rising 37% y-o-y compared to 18 mnt in FY21, as per data compiled by SteelMint. Out of this, the share of imported scrap was 3.35 mnt, a drop of 20% from 4.20 mnt seen in FY21. Domestic scrap consumption in the last fiscal touched 21 mnt from 14 mnt in the previous fiscal.

Overall, India has been consuming 22-24 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 behind rise in scrap consumption-

• Scrap share rises in secondary mills: The “metallic mix” data maintained with SteelMint reveals that the estimated ferrous scrap share in EAFs and IFs increased to 29% in FY22 from 23% seen in FY21, showing an increase of 6% y-o-y.

In FY21, the usage of scrap by EAFs 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. The jump of 6% y-o-y can be attributed to higher domestic scrap availability in FY22 which was because more scrapping centres have come up.

• In FY22, domestic ferrous scrap HMS 1&2 (80:20) prices have been high, averaging INR 40,880/tonne DAP Mumbai against INR 33,509/t in the previous fiscal year. Prices increased but still scrap usage rose 6% because, overall, crude steel production was slated to rise 16%. In such a context, scrap usage is actually less and has scope to rise, feel industry sources. “India’s ferrous scrap consumption ended the year at a higher volume y-o-y as per expectation because of greater availability of domestic scrap which also allowed imports to remain lower y-o-y,” as per industry expert.

Outlook

SteelMint expects India’s ferrous scrap consumption to improve further in FY23, by at least 7-10%.

The reasons are:

1. An expected rise in scrap imports this fiscal from 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 in FY23. FY22 saw some overhang/pent-up generation from the previous year which boosted supply. Domestic generation is usually in the 18-20 mnt range.
2. 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 the share at BFs.