India has some lofty numbers when it comes to steel production. Take a look at the data: in FY2025, the country produced around 151 MT (million tonnes) of crude steel, operating at roughly 75% of its installed capacity of 205 MT. Steel production is projected to grow sharply toward 300 MT by 2030–31, driven by infrastructure buildout, manufacturing growth, and rising per capita consumption (the per capita consumption in FY2024 stood at approx 98 kg, which may increase to 160 kg by 2030). India also has ambitious plans to transform the steel industry into a more sustainable and low-carbon sector, as outlined in the Ministry of Steel’s Greening the Steel Sector of India roadmap and action plan.
However, as the nation pushes to increase steelmaking capacity and decarbonise production, a less visible but serious bottleneck has emerged — a shortage in scrap steel, the key input required for cleaner and greener steelmaking.
Scrap steel: what it is, where it comes from, and why it’s prized
Scrap steel is recycled steel that is recovered from “end-of-life” products and industrial waste, rather than produced anew from iron ore. It typically comes from two main streams: post-consumer scrap (old vehicles, appliances, demolished buildings, machinery and infrastructure) and pre-consumer or industrial scrap (offcuts and production waste from manufacturing). It’s a prized raw material in the steel industry because it can be recycled repeatedly without losing its properties, while using 60% less energy and emitting 58% less CO₂ compared to primary steelmaking from iron ore.
Scrap steel is central to EAF (electric arc furnace) production, which is a lower-carbon route compared to traditional BF-BOPF (blast furnace-basic oxygen furnace) technology that relies on iron ore and coking coal. As EAF (electric arc furnace) production expands globally, scrap steel has become an important raw material, thanks to the double benefits it brings of cost efficiency and decarbonisation.
The shortage in scrap steel
India’s steel mills have upped their usage of scrap steel from 24 MT (million tonnes) in 2021 to over 34 MT in 2024, but this still accounts for less than 20% of total steel production, compared with a global average of 30–32%. As per a report from McKinsey, India consumed roughly 33 million tonnes of scrap steel in FY2024, of which 30% was imported – quite a significant amount. There are two sides to the shortage: one, reduced global availability of scrap steel because of tightening trade flows, and two, a fragmented domestic supply chain.
Global constraints: Export restrictions and tighter scrap trade policies are reducing global availability. Developed nations are prioritising domestic scrap retention to support their own green steel transitions, making scrap steel prices increasingly volatile. And, as more countries move toward EAF-based production, scrap is evolving from a secondary input into a strategic commodity.
Domestic supply chain woes: Despite what appears to be a large stock of recoverable steel in theory (from end-of-life vehicles, ageing infrastructure, machinery, and consumer goods), much of India’s scrap ecosystem remains informal, which is why collection is a hurdle. Approximately 70% of recycling activity occurs in unorganised, small-scale operations, characterised by poor traceability, inconsistent quality, limited mechanisation, and weak integration with larger steel mills. These issues are one of the reasons why high-end plants refrain from relying fully on domestic scrap streams. (Lower import taxes have also made imported scrap steel more affordable.)
With demand projected to surge alongside capacity expansion, the scrap shortage could likely pose a supply chain risk that may negatively affect decarbonisation plans.
Policy changes and the smallcap link in India’s scrap steel supply chain
Policy steps have begun to address the issue, including the 2019 Steel Scrap Recycling Policy and the 2021 Vehicle Scrappage Policy under the Ministry of Steel, aimed at formalising collection, improving processing standards, and encouraging cleaner technologies. Extended Producer Responsibility (EPR) norms and lower import duties have also been introduced.
While gaps remain in the scrap steel supply chain, there are a handful of domestic entities that are helping fill it — and almost all of them are smallcaps. These companies have prior expertise in metal processing and waste handling, and are now looking to tap into the need for domestic scrap steel recycling.
Gravita India: Gravita is one of the largest lead producers in India, and also has expertise in recycling of used batteries and non-ferrous scrap metal. The company announced that it would expand into steel recycling as part of its diversification strategy, with significant contributions in this segment expected to start after 2027.
Pondy Oxides and Chemicals: Established in 1995, Pondy Oxides and Chemicals manufactures lead metal, alloys and other non-ferrous metals. Last year, the company expanded into comprehensive metal recycling, incorporating a new LLP to engage in the dismantling and shredding of ferrous and non-ferrous metals, marking a move into steel recycling alongside their core business.
Antony Waste Handling Cell: Primarily engaged in waste segregation and recycling of plastic, paper and other municipal waste, the company also engages in the segregation, processing, and recycling of metals, including steel, as part of their comprehensive construction and demolition (C&D) waste management services. (Watch our interview with the company management here.)
As India moves towards a bigger steel producing capacity and climate pressures intensify, scrap steel becomes the bridge between growth and transitioning to green steel production. While gaps remain, policy initiatives along with formalised collection and improved processing standards may give domestic suppliers the impetus they need to increase supply and aid India’s steel decarbonisation goals.
Sources
Greening the Steel Sector in India Roadmap and Action Plan
Steel scrap recycling: India’s strategic opportunity to build a circular economy
India’s Steel Paradox: Scrap Shortage Threatens Growth Ambitions
Unpacking India’s Scrap Steel Trade Dynamics – ICRIER
How Pondy Oxides mines metals from scrap – The Hindu BusinessLine