In its race to keep up with the cost challenges of producing aluminium and its end products, India needs to increase its focus on recycling. With a modest recycling rate of 25 per cent and 56 per cent of the country’s aluminium imports being made up of scrap, there is certainly a lot of potential for improvement in the recycling sector. An enabling environment, which does away with some protectionist measures and duties, can prepare the country for more widespread aluminium recycling.
In 2014, India imported 0.84 million tonnes of aluminium scrap valued at $1.5 billion. In 2015, the figure moved up to 0.88 million tonnes, and at the end of 2016, scrap imports have been measured at 0.92 million tonnes. With a 25 per cent share, Saudi Arabia and UAE are the top aluminium scrap exporters to India, followed by the Netherlands and Australia.
India’s aluminium recycling industry is currently disorganized and undermined by the presence of a large number of small & medium players concentrated in southern states. These recyclers import considerable amounts of aluminium scrap to re-melt the metal and supply to downstream industries made up mostly of utensil makers, die casters and extruders. Scrap recycling in the country has turned out to be vital for the aluminium industry due to its cost implications and ability to extract molten aluminium with more purity. In India, where energy costs are steep compared to gas powered aluminium smelters in the Gulf or hydro generation based units in Nordic countries, recycling saves approximately 50 per cent energy compared to primary aluminium production. The power cost is 40-45 per cent of the aluminium production cost in India, and until the country finds cheaper energy options, recycling needs an extra push.
Today, aluminium recycling is yet to gain momentum as a standalone industry in India due to a lack of legal structure to support it, and more specifically, it is stifled by a protectionist environment. India levies a basic customs duty of five per cent, a countervailing duty of 12 per cent and a special countervailing duty of four per cent, depending on the quality of scrap imported. Since 56 per cent of all the aluminium shipped into India consists of scrap, the chorus for duty levies from the primary aluminium producers has grown louder. To counter them, scrap recyclers are also lobbying the federal government to ease the duty structure, underlining that aluminium prices from the local producers uncompetitive.
Aluminium has immense recyclability capabilities and the high value of aluminium scrap is a key incentive and major economic impetus for recycling. When recycled, each tonne of aluminium saves energy equal to 24 barrels of crude oil, over 15 tonnes of fresh or sea water usage, more than 9 tonnes of greenhouse emissions and 2.5 tonnes of solid waste. With these palpable benefits, the Indian government should reconsider its duty structure to boost the recycling sector. Secondary aluminium production goals need to be aligned with recycling capabilities and applications of newer technologies to achieve maximum recovery of the used metal. The time has come for India to take cues from Europe, where the aluminium recycling rates in building and automotive sectors are as high as 90-95 per cent and around 70 per cent for beverage cans.
Challenges/Barriers to Aluminium Recycling in India
The major challenge to success for the industry is a lack of awareness among aluminium recyclers and the unorganised nature of the sector. The industry is also short of robust recycling infrastructure, comprising collectors, dismantlers, metal merchants, segregators, scrap processors, refiners, re-melters and re-converters. Indian secondary aluminium producers depend mostly on imported scrap and there is no system for scrap collection. More organised units are needed for collecting, sorting, cleaning and separating the aluminium scrap. There are technical barriers in the form of lack of clean and reliable energy sources, low fuel efficiency in melting and holding furnaces, high contamination level in procured scrap, lack of closed loop control techniques for casting et al. A focused R&D programme can help the secondary producers overcome these technical barriers.
Future Roadmap: Betting on Strong Recycling Prospects and Technology Upgrades
The recycling industry in India is predicted to log CAGR (compounded annual growth rate) of 12 per cent in 2016, driven by segments such as aluminium de-oxidants for the steel industry, automobile industry, auto components for exports, cast components for general engineering and billets for the extrusions industry. With aluminium recycling being a forward looking industry, India needs to make the shift to secondary aluminium production. On the technology front, a special melting technique can be developed for recovering aluminium from recycling material, strictly conforming to environment norms while meeting cost requirements. The creation of new aluminium alloys compatible with recycling is also a workable option. One of the ways to promote recycling on a large scale is to award carbon points to units engaged in the process. A market needs to be created which can absorb a growing value of aluminium recycled products. Addressing these priorities is crucial to help realize India’s goal to recycle 100 per cent of the aluminium produced and consumed in the country by 2025.