News Room - Steel Industry

Posted on 18 Dec 2021

Indian ferrous scrap imports set to drop 15% in CY21

Indian ferrous scrap imports are likely to fall 15% in CY21, as per SteelMint estimates. Data suggests that imports over Jan-Nov'21 amounted to 3.45 million tonnes (mn t) against 3.85 mn t seen in the same period in CY'20, a drop of 10%. Imports in Nov'21 dropped 31% y-o-y to 0.27 mn t against 0.39 mn t in the same month in CY'20. For the full year, SteelMint's estimated volumes are 3.72 mn t against CY20's 4.33 mn t.

Volumes from key exporters drop

Interestingly, imports from the UAE are estimated to increase in the current calendar to about 1.10 mn t whereas key exporters may see a drop. Imports from the UAE rose possibly on the shorter delivery time compared to the other sourcing countries.

 

Volumes from USA, UK and Singapore have already shown a drop over Jan-Nov'21 and the trend is expected to continue till year-end. The latter three preferred to sell to other South Asian countries which paid higher rates. Moreover, the market was volatile and delivery time from far-off geographies was longer compared to the UAE, forcing Indian buyers to opt for the latter.

Why will ferrous scrap imports fall in CY21?

• Higher global prices: There was a disparity between the landed costs of imports and domestic scrap, which led to a preference for the latter. SteelMint's data shows, landed costs of Dubai-origin HMS 1&2 (80:20) worked out higher after addition of around INR 2,000/t in freight, handling and other charges. For instance, SteelMint's assessment for early December shows domestic prices (DAP, Jalna and Mumbai) ranged from INR 35,000-35,600/t ($462-470/t) respectively while imported offers for UAE-origin were pegged at $465-470/t CFR levels. In rupee terms, the landed costs to Mumbai are estimated at INR 37,000/t, rendering domestic cheaper.
   

This trend has been seen throughout the year, with prices of both imported and domestic fluctuating.

Import prices were fuelled by lesser scrap generation as auto production took a hit from the global chip shortage while collection was impacted by the pandemic.

• Container issues, higher freights: Landed costs of scrap increased because of increased vessel hiring and freight rates. Most geographies experienced a Covid surge this year. Strict quarantine rules led to port congestion, longer vessel turnaround time, and thus container shortage​

 

• Neighbours willing to pay higher: Suppliers received better realisations from Pakistan and Bangladesh which were keen to pay higher because of two reasons. One, they were more active in securing supply than Indian buyers. Two, they had no other option but to fall back on ferrous scrap as their main raw material for steel-making.
   

Data reveals, Bangladeshi buyers booked containerised shredded of UK-Europe origin at prices above $500 t starting May, even touching almost $600/t levels. Pakistan's offers for imported shredded have been more volatile but definitely well above $500/t for the better part of the year.

In contrast, Indian offers for Europe-origin HMS 1&2 stayed below $500/t CRF levels over Jul-Oct'21.

• India sponge production increases: India's sponge iron production increased post-Covid lockdown. In fact, it was up 35% in Apr-Oct'21 to 21 mn t compared to 15.50 mn t in the year-ago period. Production was supported by higher demand from mills since it was more cost-effective compared to scrap or pig iron, a trend which has sustained these last seven months.
   

For instance, prices of pellet-based sponge iron in central India hovered around INR 32,800-35,500/t against INR 36,000-38,500/t DAP (HMS 1 and 2) and pig iron's INR 44,800-46,000/t exw-Durgapur.

In CY20, sponge production had been impacted by two factors. First, iron ore supply disruptions brought on by the transition to new buyers, post-auctions. Secondly, the Covid outbreak followed, before stability in output could be restored. However, domestic supply of both metallics has normalised.

Outlook

China, Japan, and Korea are looking at higher scrap usage, with a pronounced focus on EAF steel-making as carbon emission restrictions gain traction globally.

Consequently, seaborne trade of scrap will reduce since most countries would want to retain this precious raw material within their shores. Measures speak for themselves. Ukraine has decided to raise the export duty on ferrous scrap from euro58/t to euro180/t. Russia had raised the export duty on ferrous scrap to 5% but no less than euro70/t for six months earlier this year and which may be extended. Scrap's eco-friendly attributes will perhaps make it the steel-making raw material of the future.

Source:SteelMint