Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Indian scrap markets are struggling with an anaemic shortage of scrap due to suspension of scrap processing operations amid the COVID-19 lockdown. Auto shredders in North India have build up capacity but await implementation of the scrappage policy to start operations. 


In North India, many steel mills have restarted production but are challenged with a shortage of ferrous scrap, same is the case with aluminium, copper, brass and zinc smelters that depend on non-ferrous scrap for their operations. Six automobile shredders in the National Capital Region (NCR) have been approved by the Indian government to process scrap vehicles generated domestically once the scrappage policy for the disposal of end-of-life commercial vehicles comes into play.These six auto shredders include CERO (a joint venture between Mahindra and Mahindra and MSTC); GEPS Projects, Bharat Vehicle Scrap and Dosnextgen. The other major shredders in this space include Tata Steel’s partnership with Aarti Green Tech and Maruti Suzuki and Toyota Tsusho’s joint venture that has announced plans to set up a shredder in Noida, UP in this fiscal.


Automobile scrappage in India is an unorganised sector and until now, CERO is the only confirmed government authorised centre in Noida with a capacity to collect 200-300 vehicles per month. The shredding operations at Noida can dismantle 50 vehicles per day, but it is temporarily shut due to the lockdown. CERO by Mahindra is only running the collection centre right now when Mahindra will restart its shredders it is unknown, said Prashant Rishi of Blal Steel, which is the first shredder in Punjab to start supplying shredded scrap to steel mills in Mandi and Ludhiana. In Punjab, the demand for shredded material has increased and many shredder plants importing material to carry out operations, said Rishi. 


Speaking on the scrappage policy, Rishi said the policy only focuses on the procedures of dismantling vehicles. The policy does not give much detail on scrap. If the government provides buyers discounts on purchases of new vehicles for scrapping their old vehicles in authorised collection centres, that would increase auto sales and boost the economy. No scrap, domestic or imported is being generated currently, said top official at Bharat Vehicle, a scrap dealer in North. He said that GEPS Project and Dosnextgen have not yet begun the collection of scrap. 


Indian vehicle scrappage policy was to take effect in April 2020, however, it is delayed due to the COVID-19 outbreak. In October 2019, Nitin Gadkari, Minister of Road and Transport, floated the draft scrappage policy for the disposal of end-of-life commercial vehicles. The policy’s initial draft pegged the age of trucks and other commercial vehicles to be scrapped at 10 years but was later revised to 20 years. Gadkari believes the policy could turn India into an auto hub as auto scrap would provide ample recycled raw material which could significantly reduce the cost of production for automakers. India currently imports 7mn mt of scrap. The implementation of the scrappage policy would increase domestic auto scrap availability and reduces imports. Every tonne of new steel made from scrap is estimated to save 1,115kg of iron ore, 625kg of coal, 53kg of limestone, 642 kilowatts per hour of energy and 287 litres of oil. 


The new policy would come as a welcome respite for domestic automakers reeling under slow demand even before the pandemic. None of the government-approved shredders are currently operating because of the delay in the implementation of the scrapping policy. If the vehicle scrappage policy is implemented, automakers would offer discounts on new vehicles purchases when consumers produce a certificate issued by authorised scrap collection centres verifying that they have scrapped their old vehicles.

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