Stiff import norms to hit metal scrap industry hard

AHMADABAD: The government’s decision to impose stricter norms on imports of metal scraps is likely to have an adverse impact on the industry. The move is likely to have a greater impact on Gujarat, as it is the largest importer of steel scrap in the country.

Gujarat has recently become the hub for steel-making using the induction furnace technology which uses scraps to convert into steel. Due to the state’s proximity to ports such as Kandla, which imports sizeable scrap, Gujarat has steel making capacity of around 4,500 tonnes a day, which is spread across 15 steel makers in Kutch. However, due to increasing scrap prices, most steel units now prefer sponge iron as input material.

“The decision to ban high-sea sales is likely to have a major impact on Indian importers as most of these scrap importers are marginal in nature and depend on high-sea sales for their requirement,” Avinash Bhandari, director, Electrotherm Alloys and Steel, said. High-sea sales are sales undertaken before customs clearance.

The government has been wary of explosives which find its way into the country through import of scraps and in order to track the suppliers the government decided to completely ban high-sea sales.

In addition, the government has also decided to make it mandatory for suppliers to procure pre-shipment certificate, stating the shipment does not contain any explosives. “We are already taking steps to ensure that explosives do not land on Indian coasts. But taking such harsh decisions will only increase the paperwork a delay the whole process,” DR Sabarwal of Gujarat NRE Coke’s steel unit in Kutch said.

Already scrap imports in Gujarat is at an all-time low during the current fiscal. In the past six months, ports in Gujarat imported just 0.73 lakh tonnes of scrap, as against 3.87 lakh tonnes in the previous year and about 2.1 lakh tonnes in ’04-05. “No new scrap import deal have taken place so far this year. The port has been importing less scrap,” a Kandla Port trust official said.

“Scrap importers are already pressurised due to escalating prices and 5% import duty and 4% countervailing duty which the government slapped from last budget. Just because taxes and scraps have become expensive by about 10%.

Imported scrap at Kandla costs about $250 a tonnes, as against $215 a tonne in the previous year,” Mr Bhandari said. Steel units are not using sponge iron for steel making, which is still about 6%-7% cheaper than scraps.