It is anticipated that the government will require automakers to recycle a certain percentage of steel from old vehicles. This measure is expected to enhance the steel circular economy and increase the availability of scrap steel. Based on the draft regulations concerning Extended Producer Responsibility (EPR) for end-of-life vehicles released on January 30, it is predicted that the Environment Ministry will introduce regulations mandating automakers to recycle or recover at least 8% of the steel used in vehicles from the fiscal year 2026, which was originally set at 10% in the draft. The requirement is expected to gradually rise to 18% by 2035-36, although the final mandate may be capped at 18% instead of the 30% proposed.

According to CRISIL, if automakers enhance their recycling efforts, an additional 0.2-0.25 million tonnes of steel scrap could become available. While this increase is modest compared to the total steel scrap consumption, it would still benefit the steel ecosystem and support the steel circular economy. Steel companies see the improved availability of scrap as beneficial as the sector works to reduce its carbon footprint. India, which imported 11.2 million tonnes of steel scrap in fiscal year 2024, lacks sufficient domestic scrap supply.

Tata Steel’s CEO and Managing Director, T. V. Narendran, noted that the mandate would help formalise the steel scrap market and positively impact efforts to lower carbon emissions, supporting sustainability. In steelmaking, scrap is used in electric arc and induction furnaces, while increasing scrap rates in carbon-intensive blast furnace processes could reduce emissions. As steel companies aim to decarbonise, scrap-based technologies are expected to play a key role.

AM/NS India’s Ranjan Dhar mentioned that even a slight improvement in scrap availability would be welcomed, especially given the anticipated global restrictions on seaborne trade as the industry shifts towards low-carbon steel production. Jayant Acharya of JSW Steel added that due to various countries’ protectionist measures, domestic scrap supply chains must be established swiftly to support India’s decarbonisation goals.

Dhar also highlighted that in India, vehicles have a longer life cycle compared to other countries, which means that to facilitate recycling, compelling incentives must be introduced to encourage the return of end-of-life vehicles. Additionally, steel companies are rapidly expanding capacity, with CRISIL MI&A estimating that large players will add around 50 million tonnes per annum by 2028, predominantly through blast furnace-based methods.

India’s domestic steel consumption is projected to rise by 9-10% in FY2025, according to a report by ICRA. The first quarter of FY2025 saw a 15% year-on-year growth in demand, although a slowdown is anticipated in the current quarter due to monsoon impacts. ICRA forecasts that steel sector capacity utilization will reach a decade-high of 88%, despite the addition of 15.6 million tonnes per annum (mtpa) of new capacity this year.

Between FY2021 and FY2024, India’s steel industry expanded rapidly, adding 26.3 mtpa of capacity. An additional 27.5 mtpa is expected between FY2025 and FY2027, driven by growing demand and increased imports. India’s finished steel imports rose by 35.4% in Q1 FY2025, continuing last year’s trend.

Despite rising imports, steelmakers are benefiting from lower raw material costs, with Australian coking coal prices down 45% and NMDC reducing iron ore prices by 18%. These reductions are expected to support profitability, though temporary margin contractions may occur in Q2 FY2025.

India’s domestic steel consumption is projected to rise by 9-10% in FY2025, according to a report by ICRA. The first quarter of FY2025 saw a 15% year-on-year growth in demand, although a slowdown is anticipated in the current quarter due to monsoon impacts. ICRA forecasts that steel sector capacity utilization will reach a decade-high of 88%, despite the addition of 15.6 million tonnes per annum (mtpa) of new capacity this year.

Between FY2021 and FY2024, India’s steel industry expanded rapidly, adding 26.3 mtpa of capacity. An additional 27.5 mtpa is expected between FY2025 and FY2027, driven by growing demand and increased imports. India’s finished steel imports rose by 35.4% in Q1 FY2025, continuing last year’s trend.

Despite rising imports, steelmakers are benefiting from lower raw material costs, with Australian coking coal prices down 45% and NMDC reducing iron ore prices by 18%. These reductions are expected to support profitability, though temporary margin contractions may occur in Q2 FY2025.