India's ferrous scrap imports slide 20% y-o-y in FY'26 amid cheaper domestic alternatives

• India's ferrous scrap imports see steepest y-o-y drop in last 4 years
  
  
• Domestic scrap generation surges 22%, reducing import dependence
  
  
• Middle East tensions, freight volatility may limit imports in FY27
  
  

Morning Brief: India's imported ferrous scrap fell sharply by 19% y-o-y to an estimated 6.82 million tonnes (mnt) from 8.45 mnt in FY'25, according to BigMint data. The drop marks one of the steepest y-o-y declines in the last four years, driven by compressed mill margins, surging domestic scrap generation, and lower import competitiveness.

Despite the decline in imports, India's overall ferrous scrap consumption actually rose 17% to a record 41 mnt in FY'26 from 35 mnt in FY'25. This is because domestic scrap generation jumped 22% y-o-y to 32 mnt, reducing the country's dependence on imported material.

Grade-wise and region-wise import scenario

Among all import grades, heavy melting scrap (HMS) recorded the sharpest decline in absolute volumes. Meanwhile, MS shredded saw the steepest percentage decline at 35%, as the price premium for shredded grades became increasingly difficult to justify amid margin pressure.

Western India remained the largest importing region despite an 18% y-o-y decline to 2.8 mnt, while northern India saw the sharpest drop of 27% to 1.77 mnt. Imports into southern India fell by 15% to 1.63 mnt, whereas eastern India recorded only a marginal decline of 6% to 0.63 mnt, indicating relatively steady buying activity compared to other regions.

Why did imports fall?

The sharp decline in India's ferrous scrap imports during FY'26 was mainly due to the better availability and competitive pricing of domestic scrap and alternative metallics. At the same time, uncertain global market conditions and volatile import prices kept buyers cautious, resulting in weaker interest toward imported scrap across most regions in India.

At the same time, domestic scrap availability improved due to rising vehicle scrapping, infrastructure demolition activity, and higher industrial scrap generation. This reduced dependence on imported cargoes, particularly in north and west India, which are traditionally key import-consuming regions.

Notably, India's scrap-based crude steel production rose sharply by 16% y-o-y to 38 mnt in FY'26, outpacing overall crude steel production growth of 11%.

Imported HMS 80:20 (Europe-origin, Jalna landed) was largely assessed in the range of INR 33,000-37,000/t during the fiscal, while domestic scrap remained cheaper by around INR 2,000-4,000/t. This price gap made imported cargoes commercially less viable for electric arc furnace (EAF) and induction (IF) mills, prompting buyers to increasingly shift towards domestic scrap and alternative metallics such as sponge iron and pig iron, especially given weak margins during the prolonged monsoon when steel prices fell to a five-year low.

Although imported scrap prices softened briefly during parts of mid-2025, rising freight costs, Red Sea rerouting, and geopolitical tensions in the Middle East pushed landed prices higher again in early 2026.

The Indian rupee also depreciated sharply and hovered above the INR 90/$ mark, particularly during the last quarter of FY'26, further increasing import costs and keeping many buyers on the sidelines to avoid procurement losses amid uncertain global market conditions.

Country-wise trends

The US remained India's largest scrap supplier in FY'26 despite a 28% decline. Among the top 10 suppliers, Brazil was the only supplier to record a 30% increase, as competitive freights and improved HMS availability made it an attractive source.

Outlook

The structural rise in domestic scrap availability is expected to keep India's dependence on imported ferrous scrap relatively subdued compared with historical levels. However, the slower-than-expected rollout of end-of-life vehicle (ELV) recycling may delay the creation of a large domestic ferrous scrap pool that was expected to support secondary steelmakers and reduce import dependence. At scale, the policy could generate 1-2 mnt of additional steel scrap annually, particularly benefiting scrap-intensive hubs such as Mandi Gobindgarh and Alang.

However, unless policy flexibility is introduced and ELV collection infrastructure improves significantly, India's vehicle scrappage ecosystem may remain constrained in FY'27. Despite 9.52 million vehicles becoming age-eligible in FY'26, automakers achieved only around 30% of mandated scrappage targets, reflecting weak ELV inflows, limited testing infrastructure, and operational bottlenecks across the recycling chain.

The Geopolitical risk wildcard: Further Middle East escalation is the single biggest upside risk - adding $15-30/t freight premium instantly.

Overall, India's imported ferrous scrap market is expected to remain cautious. Higher availability of cheaper domestic metallics, including local scrap and sponge iron, continues to reduce import viability for EAF and IF mills. At the same time, freight volatility, geopolitical tensions in the Middle East, and elevated global scrap prices are keeping landed import costs relatively firm. However, any sharp improvement in domestic steel demand or tightening in local scrap availability could revive selective import buying during FY'27.