Melting ferrous scrap prices in Indian domestic market continue to remain on its northward trajectory, rising by up to INR 2,000/MT (USD 30) within a month owing to falling Indian rupee that has led to costlier imports and due to sharp surge in steel prices.
In addition, low generation of ship breaking scrap is being believed to be another key factor which has influenced scrap prices in India—the second largest ship recycling country in the world. The impact of this has primarily been felt in the coastal state of Gujarat where Steel mills depend heavily on ship breaking for raw material. The extent of the dip in ship breaking activity is such that scrap prices in Gujarat have ballooned to a 48 month’s high.
As per SteelMint assessment, the melting scrap prices in India’s major consuming markets like Gujarat have increased by INR 2,500/MT (USD 38), Maharashtra by INR 1,000-1,500/MT (USD 15-23), Chennai by INR 1,000-1,200/MT (USD 15-19) & in Ludhiana by INR 2,000/MT (USD 30). The steel makers in these respected areas are melting more than 70% scrap to make hot metal.
SteelMint, in its assessment, has considered markets such as Gujarat, Ludhiana, Chennai, etc as a benchmark owing to the magnitude of their consumption of melting scrap.
The significant rise in melting scrap prices is being considered as major development in the steel sector owing to the sheer size of India’s appetite for scrap which is to the tune of about 18 MnT. Scrap accounts for almost 16% of India’s steel production. Out of the total scrap consumed about 5 MnT is believed to be imported while the remaining 13 to 14 MnT is domestic.
Gujarat – In, Alang—considered to be the ship recycling capital of the world, the mill owners have reported a dip in ship breaking activity owing to various reasons including summer season labour shortage, reduced working time, failure in procuring larger vessels for breaking, etc.
The melting scrap prices in Alang increased to a 4 year high at INR 28,500-28,700/MT (USD 431-435) which was last reported during May 2014.
Maharashtra, Producers from Jalna – one of most active markets for Indian steel trade, have confirmed the low availability of scrap due to logistic issue. According to Jalna based trade sources raw materials is presently being sourced from other states. As per mill owner’s local scrap consumption has increased due to low availability of Sponge iron. The producers in Jalna are melting as much as 65-75% scrap in their feed mix with rest constituting sponge iron.
Chennai, according to Chennai based market participants imports of bulk vessels have dried up almost entirely. However, to some respite, containerized scrap purchases are taking place from West Africa. But containerized scrap alone is proving grossly insufficient, thus leading to rise in demand for local scrap and an eventual rise in prices.
Ludhiana, the local scrap prices in North India – Ludhiana & Punjab are highly influenced with global scrap and local Ingot & billet price movements. Ingot/Billet prices in North India continue to remain high in line with low arrival of billet from other states, leading to rise in local scrap prices by about INR 2,000/MT (USD 30). Scrap melting proportions in Punjab & Ludhiana are assessed to be about 90%.
Conclusion:
According to trade participants the high price point of domestic scrap may probably remain stable in the short term. However the possibility of prices rising further seems limited owing to stabilization of International scrap prices. Another factor that may prove to hold domestic scrap prices from exploding further is the possibility of increase in sponge supply. Sponge iron plants which have not been producing at peak capacity may increase production to realize higher profits from sponge prices prevailing presently. On the other hand the recommencement of Iron Ore supply may lead a few sponge iron producers to reopen closed mills.
Leave a Reply