The government’s ban on high-seas trading of unshredded metal from war-torn zones will come into effect next March instead of October 2007 as planned, bringing temporary relief to thousands of users who rely on scrap metal to make steel.
The notice for the new deadline was issued last week, according to an official of the Directorate General of Foreign Trade, which is drafting the new import procedures. He declined to be identified as he’s not authorized to speak to media.
Nearly 1,400 furnaces across the country depend on heavy melting scrap—basically unshredded building junk—to make steel. This junk enters the furnace along with sponge iron to make ingots, and is then used to make steel products such as wire rods, channels and beams. Around 70% of India’s construction needs are met this way.
Under the new rules to prevent hazardous materials from entering India, high-sea sales —the selling of goods to a third party when they are still at sea —will be banned. Instead, importing agencies have been asked to register with the directorate to keep track of where the material originates from. Some 1,400 companies have so far applied, but no company has yet been registered.
In 2004, nine people died and several others were injured by explosives that came in a scrap consignment ordered by Bhushan Steel Ltd. The blast forced the government to take steps to regulate the industry.
Many users of scrap metal complain that the new procedure is impractical as they cannot import in large quantities and that will lead to shortage of the commodity. “If we don’t get scrap, the furnace industry will come to a standstill,” says Shyam Sundar Agarwala, managing director of Premium Ferro Alloys Ltd and president of the Kerala Steel Manufacturers’ Association.
Agarwala’s furnace is located in Binanipuram industrial estate in Kerala’s Ernakulam district and he needs 1,000 tonnes of scrap a month, which he imports in small containers from exporters in West Asia or Singapore. When demand peaks, he buys it from a trader when the goods are still at high sea. “Many of us cannot afford to buy in large quantities,” he said.
But as consumption of steel grows, many furnaces have sprung up in ore-deficit areas such as Kerala, Gujarat and other places in north India.
Rising price of metal scrap has forced producers to use more sponge iron and less of the metal in steel making. Statistics available with the All India Induction Furnace Association show that Indian imports have dropped to 2.23 million tonnes (mt) in 2006 from 3.64mt in 2005.
Association president Raj Prasad Varshney said the industry is still short of 2.5mt. “What is locally available is insufficient to meet our needs,” he said.
The Bureau of International Recycling has suggested that the government allow unshredded scrap to be imported from the US and Europe, “which are not war zones” while imposing stricter control for materials imported from West Asia or Africa.
“At present, India has a nil policy on metal scrap which should be encouraged as it saves energy,” said Ikbal Nathani, the Indian ambassador of the bureau. The Brussels-based organization promotes reuse of steel.