India’s ferrous scrap imports surge 96% in Sep’22. How long will trend sustain?

• Indian mills benefit from Turkiye’s absence  
• Key buyers Bangladesh, Pakistan lack appetite  
• India, well-stocked, can wield price advantage  

Morning Brief: India’s total ferrous scrap imports surged by a whopping 96% m-o-m to 1.06 million tonnes (mnt) in September, 2022, as per Customs data maintained with SteelMint. Volumes were at 0.54 mnt in August 2022 and at a mere 0.25 mnt in September, 2021.

In this 1.06 mnt, the share of bulk imports was at 19% or 0.20 mnt, as per data.

Ferrous scrap import volumes in January-September, 2022 stood at around 4.09 mnt, up 42% compared to 2.88 mnt in the corresponding period last year. Within 4.09 mnt, the share of bulk till September is 0.35 mnt. It may be mentioned that total bulk imports in 2021 were at a mere 45,808 tonnes, indicating the growing appetite of the Indian buyers for the same. 

Factors pushing up ferrous scrap imports

Bulk ferrous scrap imports have been rising for some time and several factors have conjoined to divert material usually consumed by other scrap consuming countries to India.  

• Turkiye‘s procurement drops: Turkiye is the largest ferrous scrap importer globally, but it has slowed down its procurement, because of a few factors. One is the skyrocketing energy prices. Steep power tariffs are forcing mills to reduce production. Secondly, the country was a major supplier to Europe but the demand downtrend in the Continent is also contributing to Turkiye’s drop in crude steel production. Worldsteel data shows Turkiye’s crude steel production in August was down 21% y-o-y to 2.8 mnt and over January-August, was also down 8.8% y-o-y to 24 mnt, leading to lower scrap consumption. Thus, mills have stayed away from scrap procurement. Scrap imports showed a steady drop from May 2022’s 2.22 mnt to 1.59 mnt in June and 1.37 mnt in July. In August, Turkiye resumed buying which pushed up volumes to 1.6 mnt but deals have been limited, SteelMint understands.

Global scrap suppliers, saddled with inventory meant for Turkiye, turned to Indian buyers and sold cheap.

• South Asian countries lack appetite: Both Bangladesh and Pakistan are voracious scrap consumers under normal circumstances. However, they are just not showing much appetite. 

Bangladesh’ sliding currency has made imports costlier, putting its mills at a disadvantage. That apart, the LC restrictions, liquidity crunch, tepid finished steel demand have conjoined to keep scrap procurement low. The smaller mills have moved to the sidelines, awaiting clearer market directions.

Pakistan, on its part, is struggling with its floods, political turmoil, liquidity crisis and currency slide. 

Further, both countries are plagued by power outages and the sliding currencies are making scrap imports costlier. 

All these factors are pushing mills to cut production and, in the process, scrap consumption. 

Suppliers have thus fallen back on other South Asian markets like India in a desperate bid to offload bulk material. 

• Bulk scrap cheaper than containerized: Container availability is tight, which is pushing up container freight, giving mills another reason to choose bulk over the former. Containerised freight is higher by $30-40/tonne over bulk. 

In any case, buyers prefer bulk loading which offers better price viability compared to containerised. 

• Global ferrous scrap trade snapshot 

The global seaborne ferrous scrap trade in 2021 was at 57 mnt, excluding the European volumes. Turkiye was the leading importer with over 24.36 mnt while India, with 3.78-mnt, was ranked 6^th. 

In 2022, India expanded it sourcing base to several countries. Suppliers include UAE (0.85 mnt), the US (0.38 mnt), the UK (0.28 mnt) and South Africa (0.25 mnt).

Outlook 

India’s current propensity to buy bulk cargoes will sustain into the medium term since the current challenges being faced by Turkiye, Bangladesh and Pakistan are not likely to be resolved soon. In fact, Bangladesh, sources say, is likely to remain bearish till November. 

Global suppliers, on their part, as per trade sources, are bullish on India and expecting a demand pick-up post-Diwali. However, Indian buyers can wield a price advantage here. Even if sellers hike offers after Diwali, Indian mills are well-stocked for two months at least and can afford to wait for prices to drop.  

Meanwhile, domestic scrap is more expensive. Landed bulk prices hovered at around INR 35,000-36,000/t in July compared to INR 40,000-41,000/t for HMS, DAP-Mumbai.