India steel scrap investment to accelerate in 2022

Investment in India's domestic steel recycling sector is poised to accelerate in 2022 following the recent announcement of the country's new National Automobile Scrappage policy, members of the Material Recycling Association of India (MRAI) told Argus.

India's national vehicle scrapping policy was announced in August last year and contains numerous measures to mandate and incentivise the decommissioning and recycling of old automotives.

Under the new policy, vehicles of more than 20 years old must undergo "fitness" tests at government-certified centres and will lose their registrations if they do not pass. Owners of vehicles that are not passed as fit will be provided with multiple fiscal incentives to scrap the vehicle at a recycling centre.

India's government envisages that the policy will drive and be supported by the establishment of numerous new recycling centres. This is in line with its wider National Steel Scrap Recycling policy goal, which envisages an initial buildout of 70 large recycling centres to process the 7mn t ferrous scrap deficit the country currently imports.

This number will then rise to 700 recycling centres to process the 70mn-80mn t/yr of ferrous scrap the government estimates it will need to hit its 2030 target of producing 300mn t/yr of steel by 2030.

MRAI directors Zain Nathani and Ritesh Maheshwari told Argus that the new end-of-life vehicle (ELV) scrappage policy contains many of the key components of government support that India's recycling industry has been working towards in the past 7-8 years and that it is already driving mounting interest in investment in India's domestic scrap sector.

"What we saw in our recently concluded conference in Goa is that [the ELV policy] has got a lot of active interest from a lot of new players, as well as existing players, because now people have started to believe that the government is inclined to support this sector and get it on a mainstream level," said Maheshwari, executive director of international trade at trading group Shabro Metallic.

Since the ELV policy was announced, automaker Tata Motors has announced deals to set up vehicle scrappage centres in Maharashtra and Gujarat. Maruti Suzuki Toyotsu India, a joint venture between India's Maruti Suzuki and Japan's Toyota Tsusho group, launched a vehicle scrapping unit in Uttar Pradesh in November last year. And in December, Cero, a joint venture backed by the Indian government, announced that it will establish four new vehicle-scrapping units in Maharashtra.

"The ball has got rolling and I think you are really going to see the impact in the next 1-2 years," said Nathani, managing director of trading group Nathani Steel.

In addition to the large automotive makers that have already indicated they will enter the recycling industry, MRAI is also seeing increased interest to invest from steelmakers that have traditionally imported large volumes of containerised ferrous scrap.

The scale of the Indian domestic market development means there will be ample room for small and medium-sized scrap merchants to emerge in the wake of initial investment from the large corporates, particularly as some of these larger players are likely to pursue a vertically integrated approach to solely generate scrap for their own use rather than sell into the wider steel industry, Nathani said.

As long as a company can meet the Indian government's criteria for ELV recycling, capital expenditure to set up a processing unit is not too high to deter smaller players, he said.

India's current ELV and wider National Steel Scrap Recycling policies offer minimal firm financial incentives to support the establishment of new recycling centres. MRAI plans to continue lobbying for more direct assistance, including potential tax relief measures or the establishment of economic zones to accelerate the industry's expansion.

The trade body has also been working with India's government for the past year and a half to launch formalised scrap standards for the country's domestic industry. The standards will be broadly in line with the specifications set by US scrap trade organisation ISRI that are also widely used as the basis for international trade. Some distinct grades specific to material commonly traded in India will also be included in the new standards.

"Right now, import and domestic [material] are two separate grades, two separate types of pricing and two separate nomenclatures," Maheshwari said. "Hopefully, the lines will be blurred in the coming years once we have the standards in place and we have more recycling units set up."

The new standards are under review and Maheshwari hopes they will be available for public scrutiny in the first quarter of this year. MRAI also aims to add stainless steel scrap grades to the national standards document.

Adoption of official scrap standards is an important step towards integrating India's vast informal scrap metal collection industry into a new formal industry set to grow over the next decade. Another key component to this integration is to transition existing collectors to trade through formal billing and invoice processes, Maheshwari said.

By Ronan Murphy