Finance

Recycling rate of metals in India way below the global benchmark


India is now the world’s second largest steelmaker with 2021 production up 17.8% to 118.1 million tonne (MT).

Kunal Bose

A common distinguishing feature of three major metals steel, aluminium and copper of which India is both a big producer and user is their infinite recyclability. But as the realisation of importance of large-scale countrywide collection of scrap of all kinds and their remelting has dawned late both in the government and industry, the recycling rate of all metals in India falls way below the global benchmark.

India is now the world’s second largest steelmaker with 2021 production up 17.8% to 118.1 million tonne (MT). But unlike countries, which pride themselves on using growing quantities of steel scrap to make the ferrous metal and thereby limit emissions of carbon dioxide (CO2), India is using annually just around 30 MT of scrap. What is particularly dispiriting is that even while so large is the end of life vehicles (ELVs) population and heaves of construction steel and white goods are regularly consigned to landfills adding to pollution, the country is required to import 7 MT of steel scrap a year. However, our scrap imports in 2020 were down 22.4% to 5.48 MT in the wake of Covid related 19.6% setback in steel output to 99.6 MT.

Much trumpeted use of green hydrogen as the reducing agent in the blast furnace (BF) instead of metallurgical coal or natural gas will take some years. In the meantime, steel industry in most places, including India is showing resolve to become increasingly more energy and resource efficient in making the metal and in the process limiting CO2 emissions. But India must also turn the focus on recycling, for the processing of a tonne of scrap in the electric arc furnace (EAF) will lead to the saving of 1.1 tonne of iron ore, 630 kg of metallurgical coal and 55 kg of limestone, according to the steel scrap recycling policy (SSRP) formulated by the steel ministry. The policy thrust is expected to encourage processing and recycling of scrap through ‘organised and scientific’ metal recycling centres across the country. This should progressively phase out scrap imports. Circular economy is all about resource conservation. This besides, large scale use of scrap for steelmaking will be an aid to improve the economy’s steel intensity. After all, the per capita use of the metal here at 76 kg falls considerably short of the global average of 225 kg.

India is a big country. BF-BOF based large steel units are in a handful of states, with the largest capacity concentration being in Odisha. Moving the metal from these centres to distant places becomes logistically challenging and cost intensive too. Unlike BF-BOF plants, setting up of EAFs does not require very large land parcels. To overcome the problems concerning big land acquisition and logistical hurdles in steel distribution over long distances, the country will do well to build many EAFs of varying capacity in different parts of the country to meet local demand efficiently and cost effectively. This way it will become convenient to give a push to steel demand in semi-urban and rural areas.

Encouragingly, the strategy to dot the country with small to medium capacity EAFs away from where the BF-BOF units are, has the backing of steel ministry. Tata Steel chairman N Chandrasekaran says: “In India we ventured into steel recycling business, a definitive step towards lower footprint production process across emissions, resource use and energy consumption… We are working to push our sustainability ambition… exploring manufacturing processes such as scrap-based electric arc furnaces and gas-based direct reduced iron.”

Passionate about promoting circularity in the industry, Tata Steel CEO and MD T V Narendran has gone ahead to build a 500,000 tonne capacity steel recycling plant in Haryana to produce scrap of ‘high cleanliness, negligible contamination, high bulk density and without radioactivity’ that will allow EAFs to make quality long steel. Earlier, M&M in partnership with MMTC got into the business of recovering high quality scrap from ELVs. Maruti Suzuki and Tata Motors are likely to follow the trail blazed by Tata Steel and M&M-NMDC. The Centre for Science and Environment has estimated that India will have a population of ‘over 20 million grossly polluting ELVs by 2025’. This gives an idea of the scope of scrap recovery from a single source. The country’s 2017 steel policy says 35% to 40% of 300 MT steelmaking capacity sought to be built by 2030 should be scrap based. Since EAFs and induction furnaces here use about 40% DRI in their feedstock, the 2030 scrap requirement will be around 70 MT. Incidentally, India is the world’s largest producer of DRI with capacity close to 50 MT. DRI is also used in BF-BOF route of steelmaking to the extent of 15% for boosting production efficiency.

Boosting scrap based steel production is a global trend. Incidentally, EAFs have a share of 70% in the US steel production. Scrap use is also very high by steelmakers in Turkey and the European Union. The practice of recycling is fast catching up with steelmakers in Japan and South Korea. What about China which plans to bring its greenhouse gas emissions to a peak in 2030 and then become carbon neutral by 2060? The country’s National Development and Reforms Commission has said EAF use of steel scrap will rise to 320 MT by 2025 from 260 MT in 2020 that curbed use of 410 MT of iron ore.

Being an importer of well over a billion tonne of ore a year, China will not spare any efforts to use growing volumes of low grade ores found locally but after beneficiation. In the meantime, Teri has given the warning that unless corrective measures, including use of scrap are taken on an urgent basis, CO2 emissions by Indian steel industry will rise to dangerously high 837 MT from the present 242 MT.

(A former FT correspondent, the author is now India correspondent for Euro Money publication Metal Market Magazine. Views expressed are personal.)


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