Ramping Up

Economic development in India has followed a different course compared to its neighbor China, where huge infrastructure projects have underpinned a metals production boom.

But metal industry growth in India has been steady and strong for more than a decade, with analysts and forecasters seeing the growth continuing for the next several years.

In the ferrous scrap sector, India is developing a growing presence as an export destination and has helped provide stability to scrap markets. Speakers at the 2010 World Scrap Congress provided insight into India’s growing market as well as information on the steel industry in other ferrous scrap importing nations, including Turkey and Taiwan.

The event, organized by Singapore-based Terrapinn, was held Nov. 11-12 in Shanghai.

MEDAL CONTENTION

Arti Lunaya of integrated steelmaker Steel Authority of India Ltd. (SAIL), New Delhi, noted that “India is the fourth largest scrap importer after Turkey, China and South Korea.”

The nation may be poised to move farther up that list into one of the top three spots. “Indian consumption of ferrous scrap is set to increase from its current level of 15 million tons to 22 million tons in 2015,” said Lunaya.

India has reached its current level of more than 15 million tons consumed through steady annual growth. The nation consumed 11.8 million tons in 2007, 12.9 million tons in 2008 and 13.9 million tons in 2009 before reaching the 15.5 million mark in 2010.

Consuming more ferrous scrap in India in 2009 compared to 2008 bucked the overall trend for that year, when the global recession caused overall ferrous scrap consumption to shrink from 530 million metric tons in 2008 to 460 million metric tons in 2009, according to SAIL’s figures. Lunaya estimated that in India, EAF steelmaking had a 24 percent market share. The nation’s scrap consumption could be even greater except that it also has access to affordable pig iron and direct-reduced iron (DRI).

For steelmaking overall, Lunaya and SAIL see Indian production growing from its present 53 million tons per year to more than 90 million tons by 2015. “India’s intensity of steel production growth will surpass China’s in 2010 and 2011,” said Lunaya, referring to 8 percent steelmaking growth in 2010 and 13.6 percent in 2011.

She also noted that since “domestic scrap generation [meets] only 50 percent of demand, the import of scrap is a crucial source.”

In presenting a list of the scrap-related issues facing India, Lunaya cited India’s low generation of scrap and the balance between the use of scrap vs. DRI and HBI (hot briquetted iron) as factors that would affect scrap flows in the next several years.

Placing DRI and HBI together in the category of sponge iron, Lunaya and SAIL estimate that “India has surplus sponge iron capacity of 32 million metric tons [and] capacity utilization is only 60 percent.”

Traditionally when weighing the use of scrap vs. DRI or HBI, steel mill consumers must consider the energy and raw material costs that go into producing these scrap alternatives. Lunaya also cited another factor: “The production of sponge iron will be affected by pollution issues,” she commented.

While a government clampdown on emissions caused by DRI and HBI production may work in scrap’s favor, Lunaya also noted that counting on reliable and sufficient scrap supply remained an issue for companies like SAIL.

Indian mills tend to buy No. 1 and No. 2 heavy melting steel (HMS) as well as shredded scrap, according to Lunaya. Indian steelmakers also tapped into the following sources, she said:

• Scrap generated by ship breaking operations on the west coast of India; Lunaya said the one main location for this activity generates some 3 to 3.5 million metric tons per year of scrap.
• Railway maintenance and expansion in India is another major source, generating some 2 million tons per year of ferrous scrap, according to SAIL.

QUALITY ON THE AGENDA

Another presenter at the World Scrap Congress focused his message on the importance of improving the quality of international ferrous scrap shipments. Aditya Roy Choudhury, vice president-procurement for Tata Steel (Thailand), based in Bangkok, said the steel and scrap industries still had much work to do to increase quality.

According to Choudhury, India-based Tata Steel overall spends as much as $2 billon on ferrous scrap annually. “We expect this figure to double over the next few years,” he commented.

The 140-year-old company has 400,000 employees in 80 nations and annual revenue of some $75 billion. In addition to making steel, Tata has divisions that make trucks and automobiles, design software, produce hydro-electric power, grow and process tea and manage hotels.

Despite the wide scope of Tata Steel’s scrap buying activity, “We have to admit, we don’t do it well,” he stated.

In a dramatic example of a quality problem, Choudhury told forum attendees that the previous week his company had received a scrap shipment with “live bombs” in it.

Challenges for scrap buyers in India and Thailand include transportation and logistics issues, said Choudhury, who referred to “reducing inland supply chain costs” as a priority for him in his current role.

He also called for “global standardization” of scrap grades and predicted that scrap-related regulations would continue to increase in India and Asia.

Large global scrap buyers like Tata also should be taking steps to buy scrap on longer term contracts, said Choudhury. He is favorable toward “three- or four-month contracting” he said, and advocated scrap purchasing arrangements more along the lines of how steel companies purchase their iron ore.

Another message on scrap quality came from Xie Qiu Hui, director general of the Shanghai Entry-Exit Inspection and Quarantine Bureau. He said secondary commodity shipments in his district have included solid waste, medical waste and swarms of mosquitoes.

The good news, he commented, is that the number of rejected loads in his district has declined from 1,500 in 2004 to a projected 300 loads for 2010.

“Foreign suppliers are very much in compliance and cooperative,” said Xie to World Scrap Congress attendees. “For that, I thank them very much,” he added.

A PIECE IN A LARGER PUZZLE

For U.S.-based ferrous scrap exporters, India’s growth is one piece of a larger puzzle revealing where many of their shipments will be heading in 2011 and beyond.

At the World Scrap Congress, Mark Lin, president of Feng Hsin Iron & Steel in Taiwan, provided a statistical overview of that nation’s status as a ferrous scrap importer.

He noted that Taiwanese rebar mills have been running at full capacity in part as a response to the Sichuan Province earthquake in China in May of 2008.

Taiwan’s scrap industry supplies about 50 percent of the ferrous scrap needed by steelmakers in that nation, but the rest is imported, with the United States, Japan and South Africa being prominent suppliers.

Steel production in mainland China is currently using far more iron ore and virgin materials than scrap, while production in Turkey is almost a reverse image, with scrap being the majority feedstock.

Presenter Ozan Bekci of Turkish steelmaker Erdemir pointed out that while some 83 percent of Turkey’s steel production currently was using electric arc furnace (EAF) technology, China’s EAF market share was just 10 percent.

Regarding Turkey, Bekci questioned whether the nation’s reliance on the EAF method was sustainable in light of limited scrap supplies. “It is not sustainable to be 75 percent dependent on imported scrap,” he stated.

The sheer size of China’s steel industry, however, still makes it a significant importer of ferrous scrap. Statistics presented by Bekci indicate that China imported some 13.7 million tons of “seaborne” ferrous scrap in 2009, nearly as much as Turkey’s 15.6 million tons.

But, with scrap demand and pricing rising in 2010, China has backed away to some extent, and the nation may end 2010 having imported only 7 million tons of ferrous scrap. “Chinese mills stepped up to the plate and increased purchases [in 2009],” said Bekci. “This was the saving grace, stabilizing the market.”

Bekci presented three different scenarios for Chinese seaborne ferrous scrap imports from 2011 to 2014. The three trend lines show China accepting shipments of anywhere from 8 million to 24 million tons of ferrous scrap in 2014, depending on variables ranging from its GDP growth to the price of ferrous scrap.

The author is editor-in-chief of Recycling Today and can be contacted at btaylor@gie.net.