Surging scrap metal imports has India producers seeking tax hike

India’s metal producers want higher taxes on imports of aluminum and copper scrap after China’s decision to restrict purchases flooded the global market with supplies.

The Federation of Indian Mineral Industries has asked the government to increase the import tax on aluminum scrap to 10% from 2.5% in the annual federal budget due on Feb. 1. The group is also asking for the duty on copper scrap imports to be raised to 7.5% from 5%.

China has restricted imports of scrap as part of a broader move to gradually end imports of all solid waste, including metals and plastics. That left the market seeking new customers and Indian buyers stepped in amid attractive pricing. The country’s aluminum and copper scrap imports rose 5% in the eight months through November from a year earlier, according to the trade ministry.

“India is at a severe threat as the U.S. diverted large volume of scrap to India since the EU and other developed countries have stringent standards,” R.K. Sharma, secretary general of the producers group said.

Inflows of aluminum scrap, which account for more than 85% of the total, are about $400 to $500 a ton cheaper than primary aluminum because of a lower import tax and discount to London Metal Exchange prices, according to Sharma. Scrap imports account for more than a third of India’s annual demand of about 4 million tons and have been eating into local producers’ market share, he said.

“Aluminum scrap imports in India are totally non-essential in nature and should be restricted to encourage the domestic aluminum industry and recycling of indigenous scrap,” he said. India is expected to soon unveil a vehicle scrap policy, which would lead to abundant availability of domestic scrap, he said.

The federation is also seeking the removal of an import duty of 2.5% on copper concentrate given the dearth of ore in India. “This will enable us to have a level playing field and compete with imports of value-added copper products from free trade agreement countries under nil duty.”

Other demands by federation include:

• Removal of the 15% export tax on bauxite
• Iron ore with up to 62% content should be exempt from an export duty of 30%. Currently, exports of ore with 58% iron content or less are tax-free.