This is part 1 of a 2-part series on scrap recycling in India, come back tomorrow for part 2.
The downturn in the Chinese economy has claimed another unwitting victim – the scrap metal industry. Already, in the US, scrap dealers are looking to fill a huge export demand gap left by China’s absence as a buyer.
It’s not as if this has been an overnight development. US exports of ferrous scrap to China (excluding stainless) peaked at 5.5 million metric tons in 2009, and they have fallen every year since.
The fall in iron ore prices forced US scrap exporters to look for new markets to send their metal. Next in line for ferrous exports were India, Turkey, Thailand, Saudi Arabia and Mexico.
After China’s export demand fell even more this year, all eyes turned to the one place with enough population and development to make up that gap: India, the World’s largest democracy.
India’s Scrap Problem
Before economists and scrap dealers sit back and relax, thinking they have found their demand replacement, it’s important to note that India is certainly no China in the context of the recycling market.
Recycling of metals was, and still is, a largely unregulated sector here. There are hardly any laws governing the scrap sector, except perhaps that of e-waste, which came into existence in 2011, and the e-waste law, allege many, remains largely a paper tiger with little actual enforcement.
To claim that the Indian metal recycling sector is still at a nascent stage would be an understatement. To be candid, there was never ever any concerted effort in the last 65 years to utilize tons of non-segregated scrap thrown away everyday by industry; with consciousness of recycling creeping in only recently.
Buzzwords such as carbon footprint and waste of natural resources have only started creeping up into the consciousness of the nation’s 1.2 billion population recently.
Preponderance of Small Firms, Little Organization
The metals recycling business in India is, at best, disorganized and does not enjoy industry status in the eyes of the government. There are no designated collection centers, scrap yards or processing centers. Instead, much of the “waste” is picked up in urban centers even today by waste collectors, which at best, may be described as a cottage industry.
A Frost & Sullivan Metals and Minerals Practice report that was published earlier this year said the Indian Metal Recycling industry was “challenged by key interlocking crises of minimal existence of a metal scrap recycling ecosystem and lack of any domestic laws and legislation that assist and apply to the industry.”
No Viable Domestic Scrap Market
Here’s a classic example: End of Life Vehicle legislation does not exist. Nobody in India has even heard of scrapping/recycling old vehicles even though the vehicle population increases by thousands of new vehicles every day. Then, there’s a protectionist environment in place on the import of metal scrap (including aluminum) – all of which is hurting the existing metal recycling companies.
Check this out: the overall Indian recycling rate is about 25%. Compare this to the US – which is a net exporter of scrap with recycling rates of 80 – 90% – and Europe, which has recycling rates in excess of 70%.