Rising scrap imports to India will have large impact on the domestic sponge iron industry.
Update: On 8th of May, 2013, Ministry of Finance, GOI imposed 2.5% basic custom duty on Melting Scrap of Iron and Steel and additional duty of 4% of Brass Scrap. This interview was conducted before the duty was imposed. Sponge Iron Manufacturers Association (SIMA) represents the Indian DRI Industry and provides a common platform for regular interface with the Government of India and other regulatory authorities. They concentrate on market development, collection and distribution of industrial data and commercial information, essential for decision making in the current fast changing business environment. Besides its traditional role of keeping its members updated with the development and data, both at national and international levels, SIMA also takes up image building exercise at regular intervals. As on date, SIMA has a membership of 80 sponge iron manufacturing units which include 77 coal based and 3 gas based units.
Steel 360 Team recently had a conversation with Mr. Deependra Kashiva, Executive Director, SIMA, about scrap imports to the country. He had the following to say – “Steel scrap and sponge are complementary and supplementary to each other. A trade barrier should be created to control the import of steel scrap and save the precious foreign exchange.”
Following is the excerpt of the conversation:
Q. Since scrap imports to India attract no import duty currently and no such duty was announced in the recent Budget, How will it impact scrap imports?
Due to the slowdown in global steel industry, India and Turkey are the two attractive markets for the steel melting suppliers. If you look into the demand and supply scenario of steel in India, you will find that the demand is out pacing supply side. The primary reason for this is that no big blast furnace based steel capacity has come up in the country except Brownfield expansion by main producers. Therefore, additional steel production is mainly supplemented by the secondary steel sector which utilizes steel scrap as well sponge iron. If you look into the import pattern, you will find that import of scrap is continuously increasing. This year it is expected to break all the previous records and will cross 8.0 million tons mark. This will be a record in the history of Indian steel industry. I am afraid under the present scenario in the next financial year this figure even may increase substantially.
Q. What should be the overall impact of higher scarp imports to India?
I think this will depend on the world steel developments. In case of economic recovery, leading world steel producers will continue to focus on electric steel making route which may reduce the overall availability of steel scrap. Let us closely watch the world steel scenario.