Commodity Analysis

From scrap to steel, a giant green stride

Satya Sontanam | Updated on July 14, 2019 Published on July 14, 2019

With the express intention to make India self-reliant in the supply of steel, to reduce the environmental impact from steel production, and to organise the informal metal recycling sector, the Government has for long been looking to formulate a Steel Scrap Policy.

That intention moved a step closer to realisation, with the Ministry of Steel recently releasing a draft of the policy.

The Steel Scrap Policy wants metal scrapping centres in India to ensure processing and recycling of steel scrap generated from various sources and a variety of products to add to domestic production.

Steel scrap includes home scrap, which is generated during the manufacture of steel in steel plants; new scrap, which is generated during manufacture of steel products such as auto components and white goods; and old scrap, which is steel from obsolete steel products and from appliances, machinery, buildings and vehicles.

The policy also defines the roles of scrap-collecting centres, the scope for public-private partnerships, and the responsibilities of various parties, including dismantling and scrap-processing centres, the government, manufacturers and owners.

Why now?

Production of steel from scrap has the capacity to reduce the negative impact on the environment in a significant way. The energy requirement to produce a tonne of steel from scrap is expected to be lower by 16-17 per cent. It also reduces water consumption and GHG (green house gas) emission by 40 per cent and 58 per cent, respectively.

On the back of environmental benefits, the global demand for steel scrap has increased considerably in the past few years. Japan, the US, and China have increased scrap-based steel production, alongside a proportionate reduction from the primary production route.

Further, in spite of huge steel scrap availability in the form of vehicles and appliances that have been through the complete wear-and-tear cycle, India is dependant on imports for about 20 per cent of its scrap requirement (of 30 million tonnes) a year.

Scrap from Europe and the US is being redirected to India, particularly after China had in 2018 imposed a ban on 24 types of “foreign garbage”.

India’s demand for scrap is expected to increase to 50 million tonnes in 2030; the National Steel Policy has set a production target of nearly 300 million tonnes of steel by that year. This renders it imperative for India to facilitate the efficient use of scrap for steel production.

Aggregator to user

The first in the chain is the aggregator who collects and dismantles the scrap. Original Equipment Manufacturers (OEM) or dealers of steel products such as vehicles and white goods are expected to facilitate the collection of old goods either through take-back schemes or by setting up scrap centres.

The aggregator will hand over the depolluted or dismantled vehicles or goods without any legal liabilities or encumbrances to the authorised scrap processing centre. The scrap is then processed to cater to domain-specific user industries of steel.

There are challenges to this working model, including in the efficient transportation of the goods, encumbrances on the goods, and the high cost of installing a recycling centre.

Formalising the recyclers

The proposal is expected to increase costs for the users of steel such as manufacturers of vehicles, auto components, infrastructrure and construction companies because they will be required to install scrap-collecting, dismantling or recycling centres. They will also be under pressure to use more recycled materials and to assist scrapping centres on ways to dismantle and recycle goods.

But the policy will spur the recycling industry as it helps formalise the unorganised sector. Public-private partnerships can open up opportunities for small and medium enterprises.

Further, the policy, if implemented, will go a long way to make the steel scrap industry more sustainable with environment-friendly policies.

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Published on July 14, 2019
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