Steel scrap has become an increasingly strategic resource for countries and their steelmakers as a key input for emissions reductions. India, the world’s second largest steel producer, has set ambitious targets to double the share of scrap use in its total steel output in the coming decades. The question is: where is the scrap?
Scrap steel can significantly reduce emissions in steelmaking when used to feed electrified furnaces. It can also bring down emissions from traditional blast furnaces by replacing shares of iron ore used in production, which usually requires carbon-intensive processing.
The coal-powered blast furnace route accounts for nearly 60% of Indian crude steel capacity – a share set to rise with planned expansions. This process drives the iron and steel sector’s contribution of roughly 10% to the country’s total carbon emissions. The potential benefits of greater scrap usage have therefore been highlighted by top industry figures. But supply constraints represent a significant hurdle.
The Indian government aims for scrap to feed 50% of its steel production by 2047, a figure that currently stands at 23% . It is also seeking to more than double its crude steel output in the next decade, to reach 400 million tonnes per year.
With domestic scrap metal availability tight, and systems for its collection still developing, India is currently reliant on imports to meet the shortfall. Roughly a quarter of its 41 million tonne ferrous scrap consumption in the 2024-25 financial year was met with imports, according to recent analysis by the consultancy EY-Parthenon, alongside the Confederation of Indian Industry and WWF-India. Making greener steel As of 2023, roughly 70% of the world’s steel was produced using a coal-based blast furnace-basic oxygen furnace (BF-BOF) . Iron ore and coking coal are added to the blast furnace to produce pig iron, which is then refined into a liquid in a basic oxygen furnace, before being cast into various forms of solid steel. This carbon-intensive process is the key driver of steelmaking’s 11% share of global carbon emissions.
Switching to electric arc furnaces (EAF) can greatly reduce emissions compared to the coal-based BF-BOF route, and particularly if they are powered by renewable energy sources. Most EAFs use recycled scrap steel as a full or partial feedstock to produce liquid steel. In some countries, including the US, Italy and Mexico, the EAF route already accounts for most steel production. But in China, for example, that share sits at approximately 10%. Direct reduced iron (DRI) is also a key input for lower-carbon production in EAFs. Also known as sponge iron, this is created by removing oxygen from iron ore using “reducing” gases, such as hydrogen. The majority of DRI is, however, currently produced using fossil fuels, mostly gas, with a small share made using coal.
The wider use of green hydrogen (hydrogen produced using renewable energy sources only) in ironmaking is therefore seen as an important potential driver of steel decarbonisation. The combination of green hydrogen-DRI-EAF is the most mature, technologically viable path to near-zero emissions steelmaking. Projects producing at a commercial scale via this route are currently limited. Sources: Global Energy Monitor , CREA , SteelRadar But this flow of steel scrap is being squeezed by rising global barriers: as of March 2025, 48 countries had imposed some form of restrictions on scrap exports. By 2030, the global scrap trade is expected to shrink by 15%, EY-Parthenon notes. India’s key suppliers, the US and the European Union, are expected to see a drop in exports of 39% and 23% respectively.
“Supply constraint of scrap is a big challenge – not just for India, for the world over,” Sanjay Mehta, president of the Material Recycling Association of India (MRAI), told Dialogue Earth. “Countries don’t want any kind of metal scrap to go out because they have realised in the last seven, eight years that it’s an essential commodity for reducing carbon emissions.”
Amid these global dynamics, analysts and industry figures told Dialogue Earth of the need to focus on developing domestic scrap recovery. Here, they assess recent progress towards this and, with a new steel scrap recycling policy on the horizon in India, share their outlook on the way ahead.
Developing domestic systems
The authors of EY-Parthenon’s analysis are clear on the chances of India hitting its 2047 scrap production goal.
“In short, India will find more scrap, but not enough to fully meet both its steel growth targets and the decarbonisation needs,” Swapnil Kaushik, an EY-Parthenon senior consultant who co-authored the report, told Dialogue Earth. The country is expected to face a scrap supply deficit of 40-50 million tonnes by 2050 “even under optimistic scenarios”, the report notes.
Nonetheless, domestic scrap stock is anticipated to grow by 6-8% a year through to 2050. Analysts are therefore emphasising the need to focus on improving scrap recovery and processing to reduce import dependence. As Kaushik said, “the long-term answer must be domestic ecosystem building”.
Sakshi Balani, director of Indian steel decarbonisation at the non-profit Climate Catalyst, explained that these supply constraints simply reflect “where India is in its development trajectory”.
“Much of the steel consumed during India’s rapid growth in recent decades is still locked up in infrastructure, buildings and vehicles that are in active use,” she told Dialogue Earth. “The large end-of-life scrap volumes that advanced economies now enjoy reflect steel installed generations ago.”
Establishing the systems to capture increasing volumes of domestic scrap has been a policy focus since 2019, when the national steel scrap recycling policy was launched. Alongside a 2021 vehicle scrappage policy and a 2019 ship recycling act, this created “a more coherent regulatory environment for scrap than existed before”, said Balani.
These policies have sought to coordinate a fragmented system largely dominated by the informal sector, which Mehta of the MRAI characterised as the key challenge.
Policy is one part. Implementation is another. Sanjay Mehta, president, Material Recycling Association of India In an interview with Dialogue Earth, Mehta, joined by the MRAI’s secretary general Amar Singh, said that progress has been made in setting these scrap policies. But they also pointed out that measures such as goods and service tax (GST) and collection procedures have made formal recyclers more expensive. The informal sector avoids this tax, allowing it to undercut formal recyclers while disincentivising formal participation. This is holding back scrap from moving up supply chains to the steelmakers. Singh said the MRAI is therefore asking the government to cut GST on scrap from 18% to 5%.
Other challenges mentioned by the MRAI include a lack of uniform national quality standards, with a need to strengthen systems for scrap grading and certification, as well as a lack of traceability systems linking scrap origin to end use.
India’s Ministry of Steel is currently finalising a new policy that will replace the 2019 scrap steel recycling guidelines, alongside a proposed national steel policy. Many of the experts Dialogue Earth spoke to have been actively involved in consulting with the relevant officials on these.
Mehta said he feels positive about the government’s awareness of and engagement with these challenges, and “optimistic” for the recycling sector’s development. However, he was cautious on the potential for swift change: “Policy is one part. Implementation is another. We can’t force each and everyone to implement overnight.”
Vehicle scheme highlights challenge
India’s vast fleet of vehicles has been seen as a promising domestic source of scrap steel. There has been a vehicle scrapping policy in place since 2021, but progress toward its goals has been slow. Balani said this is the “most visible example” of the gap between policy and implementation. Recommended This policy established a system for registered vehicle scrapping facilities (RVSFs), which were tasked with processing a total of 500,000 vehicles annually by 2026. However, between August 2022 and July 2025, only around 350,000 vehicles were scrapped of an estimated eligible pool of 12 million, EY-Parthenon notes.
“The constraint is not the policy architecture but the physical infrastructure required to deliver it,” Balani added. She pointed to a lack of testing stations, regional dismantling centres and processing facilities.
Amar Singh highlighted the lack of incentives, and mandates, for drivers to take vehicles to these registered facilities: “If I sell it to a RVSF, they will pay me 30,000 rupees. But if I sell my car to any informal guy, he will pay me 60,000 rupees.” Until RVSF scrapping is mandated, Singh does not expect the policy to work. But “once the material starts flowing to registered vehicle facilities, there will be a huge turnaround in this sector”, he said. EY-Parthenon’s analysis projects that vehicle recycling could grow by around 13% by 2030, supported by such policies.
Finding new sources
Other sectors highlighted by analysts as potential sources of scrap steel for India include its growing manufacturing sector, alongside construction, infrastructure and shipbreaking.
Singh said the construction and demolition sector is at a “very nascent stage” as a scrap source. EY-Parthenon analysts told Dialogue Earth that, due to these projects’ long lifecycles, this source will only deliver significant scrap steel volumes in the medium to long-term.
Scrap from shipbreaking, meanwhile, has received some policy and research attention.
India scraps roughly a third of the world’s end-of-life vessels, mostly in its western state of Gujarat. A 2024 study co-authored by Balani found that scrap steel from shipbreaking accounted for as little as 0.5% of India’s steel production. It projected the sector to expand in the coming decade, as a vast swathe of the global fleet is due to reach retirement. But this, too, is bound up in international scrap dynamics: notably, some European organisations have called for the restriction of end-of-life vessel exports, in favour of retaining the material internally. Heavy-duty cranes lift massive pieces of metal from decommissioned vessels in Alang, Gujarat. India’s vast shipbreaking yards currently contribute limited scrap to steel production but are considered to have strong potential (Image: Nasirkhan Davi / Alamy) New scrap-based production is also coming online in India, signalling growing efforts towards scrap use among key steelmakers. In March, Tata Steel inaugurated an electric arc furnace in Ludhiana, in the northern state of Punjab, with plans to only use scrap steel as the feedstock.
A Tata spokesperson told Dialogue Earth that 40% of the required scrap will be sourced from the company’s recycling plant in Haryana, approximately 200 km south of Ludhiana. The remainder will be sourced from within a 300 km radius. They stated that 50% of the facility’s power will come from renewable sources, with an expected carbon footprint of less than 0.3 tonnes of CO2 per tonne of steel. This compares to approximately 2.2 tonnes for Tata’s typical Indian operations. Recommended Beyond policy, experts highlighted that steelmakers could collect, aggregate, dismantle and process scrap themselves – what EY-Parthenon’s analysis terms “backwards integration”. Doing so could not only secure supplies but also capture margins of up to 16% – which, the report notes, currently go to intermediaries.
“The companies building integrated domestic scrap supply chains now will be in a stronger position than those that remain dependent on imports as global availability tightens,” said Balani.
Looking ahead
With new policies being finalised, experts highlighted several ways for the government to support domestic scrap collection and unlock supply.
As with crude oil, liquified natural gas, coal and coke, “scrap has to be looked at as a raw material at the same level of nation-building security – at a strategic level,” according to Kapil Bansal, the lead author of EY-Parthenon’s recent report, and an energy transition and decarbonisation partner at the consultancy. Balani, likewise, said such a designation would be “the most consequential step” for the scrap sector’s development.
Bansal also suggested stronger regulations that extend the responsibilities of producers could be useful – for example, mandatory recycling for steel end-user industries.
Balani concluded that policy must move from guidance to enforceable standards, incentivise investment in scrap collection and infrastructure, and bring informal collectors into regulated supply chains. “Until that happens”, she said, “the gap between India’s scrap ambitions and its scrap reality will persist. But with the policy revision on the horizon and growing industry momentum, there is a real opportunity to close it”.
With a scrap supply deficit set to persist, Kaushik underlined the wider implications for India’s attempts to turn its steel sector green: “Scrap should be looked to as a short-term lever, while the major decarbonisation routes to produce steel would be through green hydrogen-based direct reduction of iron, alongside scrap-based electric arc furnaces powered by renewables.”
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