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

India’s Ministry of road, highways, and transport (MoRHT) has amended a clause regarding the specifications of finished steel and reinforcing bars used in the road and bridge works. The amendment will allow the use of steel produced by secondary steelmaking using ore, billets, pellet, or melting scrap in the construction of roads and highways subject to fulfillment of few standard compliances regarding the specific grades of steel.


Earlier, road developers were required to use steel produced only by the primary steel producers in highway construction. This amendment is done based on the analysis and discussions with stakeholders and technical opinion, according to official notification. 


The move would benefit the secondary steel sector which faced a difficult time amid the COVID-19 pandemic. It could also keep a check on primary steelmakers and avoid any cartelization and unjustified price hikes. The amendment will also widen the scope of sourcing of raw materials used in the road construction activities without impacting the quality of material used. 


It could also reduce costs through the use of new technology, curtailing restrictions on suppliers and making the procurement system transparent,” the notification states.


The decision by the ministry comes after it received representation from (ISMA) Steel Manufacturers Association steel produced through routes other than blast furnaces for the production of steel may also be allowed for road construction. 

Impact on ferrous scrap consumption 

Earlier, the government rules disallowed steel produced from shredded scrap and Sponge iron to be used in infrastructure projects under the MORTH. But after ISMA’s representation that the raw material used has no bearing on the quality of end products, the ministry has amended these clauses. 


Secondary steelmakers contributed for the 45pc share in total 103mn mt finished steel produced in 2020-21. The consumption of ferrous scrap and sponge iron is estimated to rise to around 75mn mt in the next couple of years from the present 45-50mn mt. Indian ferrous scrap imports which are at 5-6mn mt per annum could register a sharp rise in 2021. The rise could also be aided by zero import duty along with increased use of secondary steel in major infrastructure projects believe traders. 


The secondary steel market was upbeat amid this amendment news. The Indian government has been alleging that unjustified steel price hikes had pressured consumers. In the union budget for 2021-22, the finance ministry lowered customs duty on a range of products and granted duty exemption on the imports of steel scrap used by secondary steel makers.


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