India’s Steel and Ship Recycling Industries Under Siege
The Indian steel and ship recycling industries are facing unprecedented challenges, primarily driven by the dumping of cheaper steel from countries like China and Vietnam. The surge in imports, coupled with other factors, has led to a significant decline in domestic demand for steel and a crisis in the ship recycling sector, particularly in Alang.
The Impact of Dumping
A key factor behind the reduced demand for local steel is the dumping of cheaper steel into India. The surge in imports, especially in 2023 and 2024, has seen domestic steel prices plummet. In July, hot-rolled coil prices in India averaged ₹52,267 per tonne, the lowest in over three years. The landed cost of imported hot-rolled steel coils from China closely matched domestic production costs, making imports more appealing to Indian manufacturers.
Growing Reliance on Scrap Steel Imports
Growing reliance on scrap steel imports from Western countries has further weakened local steel demand. Post the pandemic, Indian re-rolling mills increasingly turned to imported scrap for its competitive pricing and higher quality. This shift has led to a 44 per cent increase in imported scrap steel by mid-2024.
The Rupee’s Depreciation
The rupee’s depreciation has compounded challenges, making raw material imports more expensive and squeezing the profit margins for domestic producers. While the weaker rupee made steel imports costlier, the low base prices in countries like China offset it, further straining the local industry.
The Crisis in Ship Recycling
The current situation in India’s steel and ship recycling industries is unprecedented. Historically, when ship recycling supply declined, steel demand often remained robust, balancing the market. However, for the first time, both the supply of ships and demand for steel have declined simultaneously, creating a severe impact on the ship recycling industry in Alang and other hubs.
The ship recycling business relies heavily on the demand for scrap steel salvaged from broken vessels. However, with cheaper steel alternatives flooding the market, the demand for ship-recycled steel has significantly decreased.
Ripple Effects
This downturn has rippled across the maritime logistics chain associated with ship recycling. The arrival of fewer ships for dismantling reduces the availability of recycled steel and disrupts logistical operations. The once bustling transport network of steel from Alang to re-rolling mills and other industries now faces underutilisation, leading to inefficiencies and higher costs.
Currently, only 20 per cent of Alang’s 120 ship recycling yards are operational, leading to severe job losses and economic distress. The loss of employment, with the number of workers dropping from 13,500 at the peak period to fewer than 2,400 in mid-2024, is further impacting ancillary industries, including logistics.
Course Correction
To address these related challenges, the Indian government must enforce robust anti-dumping policies. The Directorate General of Trade Remedies has initiated investigations, but more stringent measures are needed to bridge the price gap between imported and domestic steel. Anti-dumping duties would provide much-needed relief to local steelmakers and help restore their competitive edge.
For the ship recycling industry, targeted interventions such as financial incentives, reduced duties on recycled steel, and retraining programmes for displaced workers are essential.
Additionally, enhancing the efficiency of the maritime logistics associated with ship recycling and ensuring steady ship arrivals for dismantling can help stabilize the industry.
Without these remedies, the country’s steel and ship recycling industries risk facing long-term decline, with severe economic and social consequences, particularly in regions like Alang.
