Aluminium Crisis: Govt Panel Recommends Scrap Duty Scrapping as Global Prices Surge and Supply Tightens

Aluminium Crisis: Govt Panel Recommends Scrap Duty Scrapping as Global Prices Surge and Supply Tightens​

A mines ministry joint working group has built consensus on removing the 2.5 percent import duty imposed on aluminium scrap. Sources indicate that this recommendation is likely to be submitted to the finance ministry this month for a final decision. The move aims to mitigate the impact of an inverted duty structure that is reportedly hindering domestic competitiveness.

The proposal addresses serious concerns faced by downstream manufacturers, including recyclers and component makers. These companies are forced to import scrap material and pay the applicable duty while competing against finished aluminium products entering India from free trade agreement partners at lower or zero duties.

Addressing the Inverted Duty Problem​

The inverted duty structure is significantly impacting domestic value addition across various industries that rely on aluminium scrap. Downstream manufacturers procure materials either domestically from primary producers or through imports, yet they are handicapped by material duties.

A source aware of the discussions noted that auto component makers and others utilizing aluminium scrap pay taxes on raw inputs while having to compete with finished goods imports which face no duty levy. The ministry supports removing this tax, partly because aluminium is the only non-ferrous metal subject to such a levy.

Sharp Global Price Rise Fuels Call for Relief​

The push for duty relief comes amidst dramatically rising global aluminium prices. On the London Metal Exchange, aluminium saw prices increase from around $2,300-$2,600 a tonne in 2024 to exceed $3,800+ a tonne by mid-2026.

This significant jump is largely attributed to output issues at key smelters and supply disruptions linked to the West Asia conflict. Consequently, aluminium scrap prices have also risen, climbing 20-25 percent driven by firmer benchmark metal prices and tighter global supply conditions.

India's Scrap Supply Squeeze and Future Needs​

India currently imports between 1.6 and 1.8 million tonnes of aluminium scrap annually, sourcing primarily from Europe, the US, and the UK. This figure is projected to rise to 1.9-2 million tonnes in the current fiscal year.

However, obtaining sufficient materials could become increasingly difficult as several countries, including those in Europe, are retaining scrap for domestic recycling rather than allowing it to be exported. India's per capita aluminium consumption stands at roughly 2.5 kg compared to a global average of about 11 kg. The country is unlikely to generate enough scrap domestically to meet industry needs for at least another decade or longer as demand continues to climb.

Quality Standards Debate Looms Over Importation​

While the government backs duty relief, some primary aluminium producers have resisted the move, requesting stricter quality standards for imported scrap before any duty cut is approved. This concern highlights tensions within the domestic sector regarding material inputs.

The source clarified that scrap is collected from end-of-life products across diverse sources and is therefore mixed in composition, rendering rigid product standards impractical at this stage. It was stated that classification norms for imported scrap already exist and that the issue of quality standards will likely be handled separately from the customs duty decision.