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

Most electric-arc furnace (EAFs) in India are old and need upgrades for green steelmaking, said Ish Mohan Garg, India Chairman, Imerys & SW Asia Vice President – HTS, in an exclusive interview to Davis Index. The industry veteran is optimistic about India’s ferrous scrap consumption and expects significantly increase in scrap consumption on account of the government’s push to increase scrap availability through the introduction of steel scrap recycling policy.


Here are the excerpts of the interview in which Ish Mohan Garg shares his insights on India’s secondary steelmakers and the challenges faced by them.


Could you share your thoughts on ferrous scrap consumption in India?

Ish Mohan Garg: Use of ferrous scrap for steelmaking has always been a preferred option, however, its availability has so far limited most of the steelmakers to increase its usage. We would expect a significant increase in the consumption of ferrous scrap in the coming years, mainly on account of the government’s push for increasing scrap availability by introducing the steel scrap recycling policy. The policy aims to reduce imports and ensure domestic processing and recycling of steel products in an organised manner. 

Also, vehicle scrappage policy once implemented will ensure further availability of ferrous scrap. The policy if implemented will have a positive impact on steelmaking. One, it will boost demand for automotive-grade steel components, steel sheet and so on. This will create demand for finished steel and allied components for making the steel. Second, the availability of steel scraps will increase, which in turn will help the manufacturers optimise their costs. It is estimated that scrap worth over Rs11,500 crore ($1.51bn) will be generated annually by domestic vehicle scrap.


What is the technological status of secondary steelmakers? How competitive they are in terms of producing with limited labour?

Ish Mohan Garg: Secondary steelmaking processes at integrated steel plants are more efficient and technologically advanced in terms of automation and emission levels compared to mini steel mills. Mini steel mills in India have limited financial bandwidth and the lacklustre steel demand over the last few years have restrained them from pursuing technological upgrades. Also, the secondary steelmaking process is highly labour-intensive in terms of operations, refractory installation and maintenance. Shortage of labour is bound to have a significant impact on the productivity of all secondary steelmakers.


Globally, there is an increased emphasis and shift toward green steelmaking processes. Could you share some insights on the technological status of Indian EAF-based plants?

Ish Mohan Garg: Almost all the EAFs in India are old and they need to be upgraded mainly for dust and fume extraction during steel manufacturing for green steel making. Some steel companies are switching to electric processes which will help them reduce their carbon footprint. Also, several non-coal based technologies for primary steelmaking are currently being piloted, with the hydrogen-based direct reduction being the most developed technology.


In view of the distress felt by steelmakers (secondary steel mills), how quickly do you think they can get back to normal capacity?

Ish Mohan Garg: Most secondary steelmakers, especially the mini-steel mills, are operating at 50-60pc utilisation levels amid muted demand from key sectors such as automotive, infrastructure, capital goods and consumer durables. Most of the infrastructure projects have been deferred for a short time due to government fund constraints on account of lower tax collections coupled with its focus on social sectors. In light of this situation, a key priority for mini steel mills in the near-term would be to manage liquidity and cash flows along with liquidating the inventory either domestically or through exports. As far as revival of this sector is concerned, we could see some gradual recovery from Q3 FY2021 onwards when infrastructure and construction activities begin to ramp up, however, the journey to near normal recovery maybe 4 quarters long at least. We would expect migrant workers to start returning to work by this period and the fiscal stimulus announced by the government to improve the overall consumer demand.


Could you share your insights on India’s aluminium, copper, zinc and lead scrap markets?

Ish Mohan Garg: Scraps, in general, is the better source of input for secondary metallurgy both in ferrous and non-ferrous sectors. Suppose India implements the vehicle scrappage policy, non-ferrous scraps will also be generated from old vehicles and help the foundry industry by way of increased demand for new components. So in my opinion, it will help the industry and also save the consumption of virgin raw materials. In addition, the need of the hour is to establish a professional supply chain for any kind of metallic scrap to reach the right place and be utilized in the most-efficient manner to produce quality output.

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