India slaps new duties on scrap metal imports

The introduction of a new trade barrier on ferrous and nonferrous scrap metal by the Indian government has sparked outrage among U.S. exporters and Indian importers who expect volumes shipped to India to drop significantly as a result of the new fees.

In two separate customs notifications, India’s finance ministry announced May 8 that effective immediately it would impose a 2.5-percent customs duty on imports of scrap iron, steel and aluminum and a 4-percent duty on imports of brass scrap. Until May 8, India levied no import duties for any of these scrap metals.

In a note sent to its members, the Metal Recycling Association of India (MRAI) said it was “shocked and disappointed” with the implementation of the duties.

“MRAI is extremely disappointed with the changes in duty structure that will negatively impact the domestic steel industry (especially the induction and electric-arc furnaces) and the domestic nonferrous industry,” the Mumbai-based group said.

According to the association, India does not domestically generate enough scrap metal to meet its melting requirements and is therefore reliant on imports.

A source at one of India’s largest scrap companies told AMM that he calculates the 2.5-percent import duty on ferrous scrap will raise landing costs by about $11 per tonne. He claimed Indian officials introduced the duties to “safeguard sponge iron manufacturers in India.”

“This is ridiculous on the government’s part to force the use of more sponge iron, which is ultimately hampering the life of furnaces and increases the cost of power because sponge gives an average yield of 75 percent while shredded or heavy melt scrap gives a 95-percent yield. (Steel scrap) saves furnace life as well as power,” he alleged.

Both exporters and importers said it was still unclear what the specific impact of this new trade barrier will be.

“Logic would tell you that it will either reduce the amount being imported or scrap would have to be cheaper,” said one U.S. scrap exporter, while a second exporter said he thinks the regulations will negatively affect imports into India of ferrous scrap.

“There is strong competition for containerized ferrous scrap from the U.S. East Coast, as well as Northern Europe, and the countries like South Korea, Vietnam and other Asian nations will have an enhanced advantage if the duty stands. Likewise on bulk shipments with Turkey and other Mediterranean and Middle Eastern nations receiving an advantage,” he said.

A scrap broker based in India said it is unclear who will bear the extra costs that these duties may incur.

“This means an additional cost of $10 to $15 per tonne (for ferrous scrap). So who bears this? Indian mills will no doubt try and reduce their purchase prices in the short term, (I am) not sure how sellers are going to react,” he said.

A source at another U.S. exporter, who is also a board member of the Institute of Scrap Recycling Industries (ISRI), said as an ISRI board member “we subscribe to the philosophy of free and fair trade. This does not meet that criteria. It is disappointing to say the least. It speaks of protectionism and hidden agendas.”

The source said an estimated $10-per-tonne added cost “could easily be a deal-breaker on some ferrous deals. It will certainly not stop activity, but will have an impact where there is an existing flow of material. I hope we see India reconsider this move.”

In its letter, MRAI concluded that it is “hopeful that the government of India will revert back to the earlier duty structure at the earliest and in fact agree to the demands of metal recyclers in India that have been requesting for duties on all grades of metal scrap to be abolished with immediate effect.”