India Needs More Scrap to Boost Green Steelmaking. Can It Find It?

Why It Matters

Without a reliable scrap feedstock, India’s push to decarbonise steel could stall, raising emissions and increasing reliance on carbon‑intensive blast furnaces. Securing domestic scrap is therefore critical to achieving its climate and capacity goals.

Key Takeaways

• India targets 50% scrap use in steel by 2047, now 23%
• Scrap supply deficit projected at 40‑50 Mt by 2050 despite 6‑8% annual growth
• Import reliance could fall as global scrap exports shrink 15% by 2030
• Vehicle scrapping scheme processes only 350k of 12 M eligible cars
• Tata Steel’s new EAF aims for 40% scrap from its own recycler

Pulse Analysis

India’s steel sector sits at a crossroads between rapid capacity expansion and urgent climate imperatives. The government’s ambition to double crude steel output to roughly 400 million tonnes per year hinges on boosting scrap’s share from today’s 23% to 50% by 2047. Scrap‑based electric arc furnaces (EAFs) can slash emissions dramatically, especially when powered by renewables, but the country currently imports about 25% of the 41 million tonnes of ferrous scrap it consumes. With global export restrictions tightening—48 nations have limited scrap shipments and the US and EU are set to cut exports by 39% and 23% respectively—India faces a looming supply gap that could force a continued reliance on coal‑heavy blast furnaces.

Domestic scrap collection is hampered by fragmented informal networks, high GST on formal recyclers, and inadequate infrastructure. The vehicle‑scrapping policy, designed to process 500,000 cars annually by 2026, has only reclaimed roughly 350,000 vehicles out of an estimated 12 million eligible, partly because informal buyers offer about $720 (₹60,000) versus the $360 (₹30,000) incentive for registered facilities. Construction‑demolition and ship‑breaking streams remain nascent, with ship‑derived steel contributing less than 0.5% of total output. These bottlenecks underscore why policy alone is insufficient; implementation, quality standards, and traceability must evolve to bring informal collectors into regulated supply chains.

Opportunities are emerging as the government drafts a new scrap‑recycling framework and a broader steel policy. Backward integration—steelmakers owning scrap collection and processing—could capture up to 16% margin currently lost to intermediaries. Tata Steel’s new Ludhiana EAF, sourcing 40% of its feedstock from an in‑house recycler and powering half its load with renewables, demonstrates a viable model. Treating scrap as a strategic raw material, akin to coal or iron ore, would unlock financing and incentivise infrastructure investment. If India can align policy, enforcement, and industry incentives, it can mitigate import dependence, accelerate its green‑steel transition, and set a precedent for other emerging economies.