The double-digit drop in India’s FY20 steel imports has augured well for the domestic sponge iron industry, which saw a 7 per cent rise in its production. According to the Joint Plant Committee data, the country’s steel imports declined 14 per cent last year to 6.7 million tonnes. Whereas, on the other hand, the domestic sponge iron industry witnessed 7 per cent year-on-year production growth at 37.14 million tonnes in the period under review. Scrap steel is one of the items in overall steel imports.

Imported scrap is usually available at a premium of over Rs 4,000-5,000 a tonne over domestically produced sponge iron. The price premium is mainly because of higher yield in scrap, which is close to 95 per cent as against sponge iron that is about 79-82 per cent. There are close to 950 sponge iron units across the country of which about 750 units are currently operational. Sponge iron units are either coal-based or gas-based with quality of sponge iron derived from the latter being better.

However, coal-based sponge iron production is higher compared to gas-based units mainly due to the better availability of domestic coal. While the sustainability of sponge iron demand remains a question in FY21 amid the Covid-19 outbreak and economic slowdown, industry officials are of the view that the time is right for a vehicle scrap policy in the country to address the scrap availability. Union Minister Nitin Gadkari last month had said the government would introduce a vehicle scrappage policy, under which recycling clusters may be established near ports. The policy also has the potential of injecting life into the automobile industry due to fresh demand.