The Steel Authority of India (SAIL), through its flagship subsidiary, the Bhilai Steel Plant (BSP), is auctioning a very large volume of around 120,000 tonnes of commercial rail scrap. This is for the first time in a long while that SAIL is offering such a large quantity of this type of material through an auction, SteelMint learned from its channels.
While almost 100,000 tonnes have already been auctioned so far in this quarter, the balance 20,000 tonnes are slated to be auctioned in March itself, it is learnt. The auctions actually began from December 30, 2020, although the bulk is being sold in the current quarter.
Chhattisgarh based mills show interest
Interestingly, all the participants at these online auctions have been secondary mills from Raipur and nearby region, who use induction furnaces for producing their semis and finished products.
Importantly, the scrap is being bought mostly for melting purposes, it is learnt. The reason is that Raipur, which is a hub of secondary mills in India, is located far from scrap generating centres, which are mainly the larger cities or regions close to an auto hub, say, like Gurgaon, Ludhiana or Pune, and the local mills are forced to use sponge iron as their main feed.
Hence, there were ready takers for this large volume injection in the market.
Superior quality
BSP is the first and main producer and supplier of rails to the national carrier, Indian Railways. However, it seems, there was a pile-up of inventory of commercial rail scrap over the last 3-4 years, for which approval had not been forthcoming all this while. Now that the green signal has been received from the headquarters, BSP is going ahead with the auctions.
The material which is being auctioned is primarily “industrial use” or “commercial rail” scrap. Also, it is of superior quality compared to that available in the local market because it is made as per government specifications for Indian Railways, which requires high precision specifications or else the rails can easily get rejected at the chemical composition testing stage.
With the market prices of scrap a tad higher, Raipur buyers preferred the auctioned material.
Scrap preferred to sponge
The injection of this large volume of high-grade material has indeed got the market excited since scrap is always preferred over sponge as a smaller quantity is required by the IFs. Secondly, less electricity is required to melt it. Thirdly, the ferrous yield is higher, increasing overall productivity of the furnace.
India’s scrap demand hovers around 30-32 million tonnes (mnt). Out of this, approximately 25 mnt is available locally while the balance 6-7 mnt is imported.
In such a scenario, if around 120,000 tonnes are auctioned in a single quarter at competitive pricing then it does make a significant difference in terms of scrap supply.
Highlights of the rail scrap auction are as follows:
Quantity in t
Price in INR/t ,excluding taxes.
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